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How to Thrive Despite Apple’s ATT — Eric Seufert, Mobile Dev Memo

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On the podcast I talk with Eric about the value destruction of App Tracking Transparency, the limitations of SKAdNetwork, and how to thrive as an app developer in this new paradigm.

My guest today is Eric Seufert. Eric has deep operating experience, having worked in growth and strategy roles at consumer tech companies such as Wooga and Rovio, but he also founded and sold a marketing business intelligence company, Agamemnon, and is an active investor in the mobile gaming and ad tech categories. Eric has a depth and breadth of experience with mobile apps and games that few can match. Over the past year Eric has written extensively about App Tracking Transparency and the future of mobile advertising on his trade blog, Mobile Dev Memo.


In this episode, you’ll learn:

  • Will Apple’s ATT be a net loss for Apple?
  • Can SKAdNetwork be saved, and does Apple want to save it?
  • Is focusing on organic traffic a flawed strategy?
  • What does the future of app install ads look like?

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Eric Seufert’s Links

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Episode Transcript


00:00:00 David:


Hello. I’m your host, David Bernard, and for the first time ever, I’m flying solo today. RevenueCat CEO, Jacob Eiting is busy CEO’ing.


My guest today, is Eric Seufert. Having worked in growth and strategy roles at consumer tech companies such as Wooga and Rovio, Eric has a depth and breadth of experience with mobile apps and games that few can match. He also founded and sold marketing business intelligence company Agamemnon, and is an active investor in the mobile gaming and ad tech categories.


Over the past year, Eric has written extensively about App Tracking Transparency and the future of mobile advertising on his trade blog, Mobile Dev Memo.


On the podcast, I talk with Eric about the value destruction of App Tracking Transparency, the limitations of SKAdNetwork, and how to thrive as an app developer in this new paradigm.


Hey Eric, thanks for being on the podcast.


00:01:09 Eric:


Thank you for having me on the podcast.


00:01:11 David:


So, we’re going to start off with a bit of a dead horse that’s been beaten over and over again. Apple’s motivation in enacting App Tracking Transparency, but I did want to take kind of a different perspective on it. The most interesting thing to me personally about Apple’s motivation with App Tracking Transparency is what it says about what they are going to do in the future.


Did they build SKAdNetwork purposely handicapped, or did they not really understand how handicapped it was? Were they really trying to kill Facebook, or was that a kind of a side benefit? I think that their motivations are important, because it forecasts what changes they may or not make moving forward as they start to see the impact.


So, I think the first thing I wanted to ask you is, how do you see Apple’s reaction and how they perceive ATT to be going, now that we’re seeing snap drop 25% after the quarterly earnings report, and see more of the disruption that you and others were predicting, but maybe Apple didn’t quite see coming? How do you think Apple sees this going currently? And what does that say about the future of privacy on iOS?


00:02:42 Eric:


I think Apple’s primary motivation was not to capture mobile advertising market share. I don’t think that was a primary motivation. I think that’s happened, and I think they expected that to happen, but I don’t think that was the primary driver of this decision.


What I think they wanted to do was, there’s kind of like a big picture idea here, and then an immediate consequence idea. I think what Apple did not like, was that they had kind of lost control over content discovery on the iPhone.


When the App Store was first launched, that was how you discovered apps. It was through going to the App Store, and some small part search, but then in large part just like the editorial curation that Apple exposes there. That changed over the years, and up until the announcement, or the enactment of of ATT, the way that people discovered apps was through advertising, and primarily Facebook advertising.


Apple totally lost control. The content that people interacted with on their phones was not the result of any deliberate decision on Apple’s part or some deliberate consideration. It just happened to be whatever could scale ads the best. Whatever companies could scale their ads the most efficiently, that’s what people interacted with. That’s what became dominant on the platform, and Apple really had no say in that.


Short term, narrow aperture view of this, they just wanted to regain control of that. They wanted to be the kingmakers. They wanted to be the tastemakers; the people that decided—the party that decided—what became popular on the iPhone and how the iPhone was used.


And I mean, that’s, it’s, if you’ve worked in, in gaming, especially, but if you’ve worked in mobile apps at all and you’ve ever had to go and, you know, go, go through the whole process of pitching your app to Apple, and pleading for featuring You know, that that’s what they want.


They, they like to having that control because that allowed them to percolate their new iOS features into the app community through almost horsetrading it’s like, you want featuring, We’d be happy to give you featuring, but you’ve got to integrate X, Y, Z thing into your app.


Once you do that, we’re happy to feature you. that, that was sort of the, that was the, the, the negotiating process. You know, that that process, even that process itself became less important and less prominent in the life of a developer over the last few years, In 2012 to 2015 that’s what you did every time you were launching a new app, or even if you’re doing a major update, you flew, you flew to San Francisco, you went to Cupertino, you went into a, conference room at Apple HQ and you pitch somebody.


That just stopped being something that people did. Like just people realized that, even if we get featuring, it’s not going to be that meaningful for our business, what we really need to be able to nail what we, what we have to do. Our success is dependent on our ability to scale the product with paid advertising, you know, and explicitly, you know, specifically through, through Facebook.


So, I think that was the primary motivation to regain that control right now. I think there’s a bigger picture idea here. There’s a bigger picture motivation or, or like, projection here, which is that, you know, we’re, we’re moving into a paradigm where, you know, the phone you have, the, the device you have that you consume content with is totally unconstrained, in terms of what it accesses, right?


Like, and, and how it accesses content. And that’s what that’s, that’s the sort of, that’s the behavioral, norm that, that people are moving into, they just expect their favorite stuff to be available from whatever device they have in their hand, at that moment, as long as it’s connected to the internet, they expect to be able to connect to Disney to Hulu, to Netflix, to Facebook, to anything, they use every day.


You get to a point where, you know, if you run this gatekeeping platform, like at the App Store or Google play If, if, if users have leapfrogged that paradigm into no, my favorite content is always available. It’s, you know, sort of like, it’s just, just persistent in the cloud and I should be able to access it however I want at any, at any given point in time.


Then you’ve lost control of that sort of, of that gatekeeper positioning. I feel like what Apple wanted to do they, they, know that that’s inevitable. we’ll get there, but they wanted to prolong this dominance and the prominence of the App Store in terms of, you know, the consumer relationship, that’s the first stop you’ve got to go through them to get to the content. because then that also, like that also provides them with some leverage over the, over the developer. And I think w w we’ve I think we’ve probably accelerated. But, but maybe not, maybe this, maybe this, you know, buys two to three more years of, okay, well, I have an iPhone that means I go through the App Store to get content, right.


Or I have an Android. Maybe that means I go through Google play to get to content. And not that like, this is it. Matter what device I’m using, I’m using my Samsung TV or my iPhone and my iPad or my Facebook portal or whatever, or my, my, Amazon, echo. I want to get to the content that I have available to me in a persistent way in the cloud.


Right. And so I think that was, that was also the primary motivation, or that was part of the primary motivation, but that was like, sort of like the bigger picture consequence of it.


00:08:18 David:


Right. I mean, where do you put, Apple’s kind of stated motivation of privacy in this hierarchy of, of motivations and, and outcomes because, you know, a lot of people have said, oh, well, Apple was clearly acting anti competitively to favor their own ad business and crush these other ad businesses. It was, you know, primarily driven by the greed to expand their ad revenue.


And then I think yours is really interesting as far as like the control, but then of course Apple goes and just in the quarter results recently and has stated over and over again. That it was 100% privacy motivated. do you just not buy that


00:08:58 Eric:


No, not at all. And I don’t, I don’t necessarily even think at this moment that consumer privacy, has been benefited or protected as a result of this. Right. And we can get into that in a second, but you know, I’ve been publishing a lot about, they’re still allowing fingerprint and they said they wouldn’t, that’s in the policy.


Right. It’s explicit. Like there’s no ambiguity there and they’re allowing for it. Right. And they’re not policing. And they could, because they’ve done it in the past. And so I think if you want it to be protective of privacy, That would be one of the things that you would prioritize is, preventing that from happening.


00:09:33 David:


And you don’t think that? Not that I mean, diving into fingerprinting real quick, do you think that. It’s potentially that they’re just delaying the enforcement to kind of smooth some of the disruption that tra App Tracking Transparency has already caused it because them not enforcing it immediately doesn’t mean they’re not going to enforce it.


So, but I find it baffling as well. That they’re not. So do you see them enforcing it sooner do you think that this really is an indication that they don’t actually care about privacy and that this is not ever going to be enforced?


00:10:08 Eric:


They can enforce it at some point and like they’re there, there wise, like I think kind of a widespread. That in the developer community, that there was going to be a grace period. Right. They would introduce NTT, but they’re going to allow for fingerprinting for some amount of time, because, you know, if, if you just, you know, made this very radical change and it was like absolute from day one, the impact would have been even more severe than, than what we saw.


So I, there was a belief that there would be a grace period, but you know, we’re going on like four months now. Right. And, and the thing is, you know, my, my sense was when, as soon as they, because they, you know, they talked about private relay at WWDC this year, I was like, oh, okay. That’s how they do it.


Right. Because, and I’ve talked a bunch about how it would be clunky to police fingerprinting through App Store review the store review process. Right. I talked about that in a piece. I just wrote two weeks ago or last week, and it would be clunky, but they could have introduced us in private relay.


I thought that that’s what they were going to do. Or at the very least they would roll private relay out. Cause it applies to, you know, safari traffic now. And they would say, look, well, we have to reach parody. Our treatment of the web and or treatment had been app traffic. And so therefore, you know, maybe for whatever technical reason we can’t, we can’t, obfuscate the IP address of in app traffic, it’d be too expensive or it’s a technical challenge that we haven’t solved yet.


But like, this is the moment, you know, ad tech when you must stop fingerprinting. And I think if they said that, you know, these ad tech companies would, right, because the way that they’ve sort of implemented this in a lot of these solutions is it’s like an option, right? Like they say, you can turn it off if you want.


Right. Cause I think that these ad tech companies are surprised. They thought fingerprinting was going to be. More we’re policed early on, maybe not on day one, but you’d get like two weeks a month. and so they kind of introduced this as like an optional feature. Right. And then, you know, and they, they presented it as like a, Hey, it’s a feature for developers if they want it.


And so, you know, it’s, it’s something that they could switch off and they, they they’re ready to switch off. I think. So I think even if, if Apple just sort of like, you know, kind of pantomime those motions, people would stop doing it because, okay. It’s, it’s actually, you know, it’s sort of like actually against policy now versus just before where it was like ignored, but, you know, I, I thought they were gonna introduce in iOS 15 for that reason, or at least again, like, just make the, go through the motions of saying that, that it’s, it’s not allowed, but, but so just, just back Betsy, it wasn’t about like, where does privacy sit in the, in the sort of list of motivations?


I think it’s probably so my, my, the heart, the hard time that I have with like, reconciling this idea that like, and you hear this a lot, like Apple cares about policy that people say that privacy, Apple cares about product. How could it have Apples on a person Apple. Apple’s a corporate structure.


There’s there’s however many employees at Apple. They don’t all agree on things. Right. Who and Tim cook is not a dictator. He can’t just run the company like that. Apple shareholders, have some control. His board has some control. Right. And so, you know, at least they have influence. And so like, the Apple as a, it can’t have is it doesn’t have a monolithic opinion about stuff.


It’s not an entity in its own. Right. I I just don’t buy this idea that a company can care about some abstract concept. Right? Like, here’s another question for you. Apple makes the Apple watch, It’s a health tracker. Does Apple care about your health Do they, are they really concerned? Are they genuinely, you know, invested in your health Or do they want to sell something. so the idea with privacy is okay. It gives us an opportunity to strike a juxtaposition juxtaposition against Android, which you know, has, is, is perceived, I believe, as less privacy-safe but even Android has gone to great lengths or Google has gone to great lengths to bring privacy to the forefront in Android.


A lot of it is about informing consumers about their data being accessed, but still there. They’ve done some things. Right. So anyway, I just, I don’t believe that a company, a corporate entity can care about an abstract concept. Right. putting that aside, what does privacy buy them It buys them that juxtaposition, and then it buys them cover, It buys them cover to do all this other stuff. Right. And then to, and then they spin up this big narrative that probably helps us sell iPhones. Because you know what I


00:14:07 David:


Or future AR glasses 


00:14:10 Eric:


Exactly 


00:14:10 David:


Some ways,


Positioning themselves, they they care about privacy insofar as it’s an incredible marketing tool for them. it, gives them cover for future devices. They become more and more and more and more private. this thing you wear on your wrist biometric sensors and tracking your sleep and everything else, customers are going to feel more comfortable wearing AR glasses that have cameras on.


When it’s Apple branded, than when it’s Facebook branded, there’s been backlash with the Ray-Ban, glasses from Facebook. So, yeah, I get, you I, you know, the Apple fanboy in me wants to believe that, you know, Apple you know, wants to do good in the world, but I’ve, since lost my Apple religion, but I, but I do think to a certain extent that they care about they do care about privacy whether or not any of that’s motivated by Goodwill or otherwise it’s incredible marketing for them.


That being the case, you know, and this is where maybe our opinions diverge, or at least how we interpret some of, of what’s been going on. I still am of the opinion, as naive as it may be that that privacy was a primary motivation for them, whether they’re altruistic or marketing or, whatever other reasons they have to be to be positioning themselves this way.


I still think that that that was primary and, and that, I don’t know that they even fully understood or expected some of the. the things that have been happening, I think they thought SKAdNetwork was a better solution than it actually is. I don’t know that they expected to see a company like snap that is actually fairly aligned with them, at least, in marketing and public perception as being a more privacy-focused company to see this company that has been reading and talking positively about App Tracking Transparency and see them drop 25% in a single day, because, and then say specifically it’s because SKAdNetwork isn’t delivering.


I still think personally. This has more to do with Apple, not understanding and not listening to the industry, which we’ve seen for decades, Apple doesn’t listen, they’re not good at receiving outside feedback on roadmaps, on, on their APIs, on anything else. They think they know what to do.


And they think as a product company, they can just build this product bring it to the world. And it’s going to be the best thing since sliced bread SKAdNetwork is just another. Yeah. Another example of them trying that approach and then just falling flat on their face. I think this is important because if that is the case and if they really, if the primary motivation really was privacy, then maybe we do see an SKAdNetwork 3.0, that’s way better than this current one.


After they realized they’ve destroyed tens of billions of dollars of value, and also potentially handicapped their own platform because as ad efficiency goes down and as apps struggle to gain traction, they lose too. So, yeah, I mean, I guess just, I’d love to hear your kind of response to that. Cause I know we probably disagree on this a bit.


00:17:37 Eric:


I guess it doesn’t really matter. Like it, you know, if we, I don’t know, at this point it kind of seems like semantics a little bit. Cause it’s like, well, all they care about privacy because privacy is good marketing messages. But my point is like, I don’t think they genuinely care whether people’s data is being accessed by advertising networks.


Right. I don’t think they cared about that to the, to the degree that, it didn’t impact. It was, it was, it was happening sort of unawares, right? Like, or, you know, that these users were like sort of unawares, once it became, like a, like a sort of social rallying cry around, you know, Facebook and, you know, it’s the congressional testimony and you’re listening on our devices.


And then once it became something that I think that they could, you know, exploit the insured, then maybe they care about it because it is a differentiator for the products and they can help them sell more products. Right. But, but I think so, first of all, so we are on a scanner 3.0, they released 3.0 3.0 is just like a minor improvement.


So 3.0 added view through attribution. And I think it added one more thing. And then also with, I was 15, they allowed the post-bacc to be sent directly to the advertiser, not just the networks. I mean, those are improvements, but I don’t see them continuing to do. S K I know work. I just, I just don’t see that, but I think I do. I do agree. I agree with you that, that they didn’t understand how consequential that this would be to the advertising. I think it’s an example of like the left hand, not talking to the right hand.


Apple is like a super secretive organization, not just to the outside world, right. Internally Apple teams are very secretive. Right. And, you know, I, I don’t know that the App Store team was talking to the iTunes team. I, I mean, I don’t even really know how that, how, how this sort of corporate structure separates those two teams.


But my sense is that like the App Store team, the people that work with developers, Aware of this, like, and I I’ve been told that I’ve been told that they learned about it at WWDC two years ago. Right. And then they got up, they had to field a bunch of angry emails and phone calls. Right. you know, I think, there, there wasn’t a whole lot of consensus internally around what the impact of this would be.


I think the impact was underestimated. And to be honest, I don’t think they would have released something if they knew that it was going to wipe out, you know, just a late, a quarter of snaps market cap in a day. Right. I don’t think they would have released something if they knew it was going to annihilate a fifth of Zynga’s market cap in a day last quarter, you know what I mean?


I don’t think they, you know, and what we saw with Facebook was that there’s like this kind of slow erosion of, of, of market cap, you know, from, from like the all time high, a couple months ago. but you know, th the damage hasn’t been just, just in terms of stock price, hasn’t been as, as, as severe to Facebook, as it has to some of these other.


You know, who weren’t really doing the things that Apple wanted, you know, to sort of, to mitigate. Right. So I, I don’t think that they fully, you know, first of all, they didn’t, you know, workshop this with advertisers. Like I know that to be true, or, or I believe that to be true, unless some people did it in like, you know, deep secret and they’ve never revealed it, but I don’t think they, I don’t think that’s true because I’ve talked to a lot of people.


No one, no one was consulted about this that I’ve spoken with. you know, I don’t think that they really truly grasped how sort of like fundamental performance advertising was, or is to a lot of these businesses, right. In terms of, they’re just, they’re, they’re sort of, you know, operational success.


Right. And so I think, because of that sort of differential between. I think what they thought was going to be the result of this and what the actual result was. You know, I, I feel like that does call into question, you know, not only just the wisdom of this, but you know, how well they can defend it, right.


When, you know, against maybe some, some, some lines of inquiry, you know, that, that are, that are sort of like, you know, kind of a more powerful and, sort of socially instrumental than, than ours than mine are then, then app advertisers or app developers. Right.


I think they’ve, they’ve invited a lot of questions about this through, through, through the severity of the impact that we’ve witnessed over the last couple of weeks and months.


00:21:35 David:


And that’s where I totally agree with that. And that’s been my perception as well. And I talk to folks as well, is that Apple didn’t fully understand the implications. And if there were people inside Apple who had a better understanding of what might play out, they didn’t have enough of a seat at the table.


And that a lot of this was just ivory tower thinking was Apple building ski network thinking, oh, this is going to be a great solution with. Like you said, workshopping it with the people who would actually have to use it. And then, you know, coming up with a better solution. So then, then my question for you is, okay.


You know, you were kind of chicken little for a year, the sky is gonna fall. The sky is gonna fall. The sky is gonna fall. I mean, you’ve been really one of the most vocal people about how big these impacts were going to be. And you had a lot of people in the industry saying, oh, it’s not going to be that bad.


It’s not going to be that bad. Well, now the sky fell. I mean, you know, a public company having 25% of its market value wiped out in a day due to one specific policy from a platform like the sky is falling, you were right. But then so now Apple sees it. They can’t, they can’t avoid seeing it. What do they do from here?


You said, they’re not going to make SKAdNetwork better. You know, are they going to not police, fingerprinting to, continue to soften the blow? Like where does it go? That’s that’s, what’s so interesting to me about okay, whatever their motivation, what they do in the future. In reaction to what’s actually happening now that we’re seeing actual results matters, you know, to, to the tune of hundreds of billions of dollars.


And, and one of the things I put in the notes to talk about is a lot of this value that’s being destroyed is not accruing to Apple. It’s not as if you know, a hundred billion dollars of market cap wiped out of Facebook and Google and snap and other folks, it’s not like Apple is actually capturing that because they don’t, they don’t have the ad inventory.


They don’t they’re, they’re not a big player in the space. So, yeah. W where does Apple go from here if they painted themselves in a corner,


00:23:38 Eric:


Maybe, I mean, I think what I would, you know, if I was an Apple, I’d be worried about, you know, they’ve got a lot of theirs are, they’re already under a lot of scrutiny, right. Like, you know,


00:23:47 David:


Right.


00:23:48 Eric:


What did the DOJ, what just three days ago, decided to re reopen the investigation in that, in the Apple, related to, to the way they operate the App Store.


I just think it’s really tough to, to maintain this line on one front while, you know, you’re obviously having to lose ground on, on another front. Right. because as we’ve seen, like there’s just been this steady trickle of them, you know, seeding ground developers or, giving up a lot of, you know, Exclusivity and, and, you know, PR preferential treatment they have with, with apps or operation, right.


Like, it just feels like maybe it’s maybe it’s they felt like, well, that will, it we’ll expand one area of that, that preferential treatment while we’re sort of like forced to abandon other, areas of preferential treatment. But I don’t know that they were, I don’t, but that would only make sense if they actually really understood how dramatic the consequences of, of ADT would be, which I don’t think they did.


You know, I don’t know. Maybe they have painted themselves into a corner. I mean, I don’t know. So that’s the thing about asking, I know work is like the way it was designed. It’s got a lot of features that on their own would be smart, you know, tech, progressive privacy, protective, you know, mechanisms.


Right. But in combination just renders this thing, like totally. Dysfunctional. And that’s the problem because now if they go back and they get rid of any of these given features, so like, or not features, but restrictions, right. So let’s say they say, okay, so first of all, I mean, and I’m assuming most people listening are at least familiar with this.


I don’t want to, I won’t, I won’t go into the whole thing, you know, description of Muscat network from zero, but let’s say they give up on the privacy threshold, which would be weird because there’s a privacy threshold for Apple search ads to be fair, but let’s say they gave that up. Right. then, then, okay.


You move a little bit towards, you know, something that, that is functional and helpful. but you’re, you’ve, you’ve, you’ve made a pretty, sort of like very kind of public facing kind of Mia culpa decision, which I don’t, you know, or announcement. Right.


Which I don’t know, that is an Apple’s DNA to do that kind of thing.


00:25:49 David:


And giving up the privacy threshold would actually allow tracking, which is what they’re saying, they’re trying to prevent. So that’s the other problem with giving much ground on some of these things with SKAdNetwork.


00:26:01 Eric:


Well, it could, it


00:26:03 David:


And that that’s kind of the broader question is like, can S K I network even be saved and, you know, let’s say regulators did come in and say, this was completely anti-competitive what’s the solution.


I mean, if you roll back and give unique identifiers to every app, you’re going to have all the same unintended consequences that came with the IDFA. yeah, I mean, that’s like four questions rolled into a statement, but, can I ask that network actually be saved while maintaining some level of privacy?


00:26:32 Eric:


Maybe, but I don’t know that you do give up. So I don’t, I don’t think you totally Naval tracking. If you’d give up the privacy threshold, what you’d enable would be the advertiser would be able to link the specific campaign to an individual user in their data environment. Now, if they chose to share that with a third party, Platform or as platform, I guess that that would be their decision, I don’t think by default it would sort of instantly, you know, make that trackable. Right. Cause all you’re really doing is adding a little bit more context every post-bacc versus just some, because you already get, I mean, if you get rid of the privacy rest, it, that just means those NOLs go away.


Right. And so you’re able to get a little, you’re able to track, you’re able to sort of observe the less frequent, transactions. Right. Or just tell me what it is. If you tell me what it is that I can design around that. Right. But we don’t even know if it’s dynamic they’ve, they’ve apparently changed it like without telling anybody.


And so all of a sudden the number of Knoll conversion values exploded. Right? I mean, that’s the thing, just make it public because if you do that, then I’m going to say, you know what? Okay, I’m going to design my app, such that like. The people I care about are going to trigger this or not. Right. It’s not something that’s in its early funnel.


It’s something that it’ll happen. You know, I can build my, I can, I can sort of like Intuit, you know, just through like kind of statistical modeling, what, where I need to place this in order for it to trigger the number of people that satisfies the privacy threshold, such that I get the data that I really need to make decisions.


Cause right now you have no idea. And you know, I have no idea where to place that. What, what is that? Unless you just experiment a bunch of times, but, but even then it’s, it’s the, the broader environments to variable because the, the campaign could go up and down in terms of like DAU or DNA every day, you know what I mean?


And then if they change it, then there’s like a totally unknown exhaustion is variable there. Right? So it’s impossible to tune your app such that you, you say, okay, look, I get it. You’re not going to let me have. conversion value if fewer than 25 people did it. Well, I know how much traffic I’m driving through all these campaigns every day.


So, so I need to consolidate my campaign, such that each one drives 400 in new, new installs every day, because I know that, you know, an eighth of the installs will trigger that thing, but those will be the users that really care about. Right. And if you did that, then at least I know, and I can design everything around that, but I don’t even know.


I don’t even know if that changes over time relative to the number of installs I’m driving. I don’t know if you’re changing it on the back end without telling me like, it’s just, you can’t operate in with that kind of opacity. It’s just, it’s just not functional. And then you’ve got the a hundred campaign ID limit, you know, you’ve got no creative, parameters in the post-bacc like, you just can’t do anything with this.


00:29:04 David:


Yeah. I mean, that’s where it does seem like this was designed as an academic exercise. How do we prevent any. Identification of any individual ever from being even remotely possible. And, and it was an academic exercise that they played out. Whereas if they had workshops with the people who actually have to use it and had, thought through the kind of business use cases and you made a valid point earlier, you don’t automatically, enable tracking by, reducing the privacy threshold.


But I think, you know, Apple She kind of rethink some of the priorities around this so that you get better business metrics, even if one or two people can slip through the cracks of being able to be uniquely identified. And I think the argument there is like, it doesn’t matter at scale, like if one person slips through the cracks, Facebook is not going to build technology around finding that person here and there that slips through the cracks because it doesn’t matter to their business to find one or two.


It matters too to have more data on everyone. So the campaign ID limit the creative ID, like all of these seem very ivory tower thinking that just is not going to play out in the real world. So, a few minutes ago you were saying you don’t think Apple will improve SKAdNetwork, but now we’re talking about how they could.


Where does the rubber meet the road what’s going to happen?


00:30:31 Eric:


I mean, I don’t. Cause I mean, the thing is like, you know, we’re just kind of riffing right now. Right? I think like if we sat, we sat down with the chocolate or the whiteboard or something, you know, because we, I wrote an article a couple months back, right. It was, it was like right after this was announced and I kind of like, here’s some suggestions here’s, here’s what you can do to make STI work.


More helpful and you know, some really smart people in the Mobile Dev Memo, slack pointed out holes in my analysis. They know if you do this, I, I, if we, if we had enough, post-tax going, I could sort of encode the idea of V over enough of the post-tax like, event in a post-tax. I could put like one character from the 90 fee and every single one, I could get the users.


So it’s, that’s why you can only have one post-bac per install, right. Because if you did 50 or so, that makes sense. So, I mean, the thing is like, if I’m just ripping, what I do believe though, is like, you can eat, you can either have the privacy threshold or the random. Right because I need so like ramp the privacy threshold up to a million.


I don’t care, but let me have real-time install accounting because without that, I can’t do anything. Right. If you, if I, if you’re off you skating, even the date of installed in that I can’t, I can’t do in Sauk county. I can’t, I can’t, I can’t, assess the economics of my campaigns because I don’t even know when the installs are produced and I can’t make changes to campaigns.


Right. Without having to shut the whole thing down and wait, and to reuse that, one precious campaign ID within the, within the sort of like constraint of a hundred. Right. So. my sense is that like, if you just solve for that allow that allow real-time install accounting and then do whatever after that you have to do to prevent me from figuring out who those people are.


Okay, that’s fine. But at least then I know this campaign drove this many installs today. These were the targeting parameters. This was the audience I was reaching. This is how much I spent. Right. And like, even if we just went, cause I don’t think you would lose a lot if you just went back. Cause right.


You know, the, the frontier that we reached was like, we’re in, especially on Facebook, I’m optimizing for value. I’m not demising for ROAS. Right. And that was like the sort of the final form of, of, of mobile advertising measurement is like, I’m telling Facebook, give me 110% ROAS on day seven. If you do that, I don’t care how you target, who you target.


You know, w how much you see CPI is, is irrelevant. I’ve got unlimited. You know, from a, from a sort of like practical standpoint on any given day spend as much as you can, but just make sure we’ll get a hundred times that was the final form. And I think even if we sort of like retreated from there back to just like CPI, the average LTV of this campaign is X and the average, you know, the CPI was Y and so therefore I’m making money.


That would be much less efficient, but still like it’s workable right now. What we have is not workable.


00:33:10 David:


Yeah, well, I think you and I could riff on all this wonky stuff for another couple of hours and, I hope Apple’s listening and actually going to make some changes and, listen better now that they’re starting to see some of this stuff, but I did, I did want to change gears and kind of start talking through.


What this means for developers and specifically, you know, sub club podcasts, what it means for subscription app developers and, and what you were just talking about. I think, I think is actually a really important, topic that not a lot of people fully understand you’ve written about it in the past, but I think it’s still somewhat abstract enough, that I wanted to, to kind of have you describe it in more concrete terms.


And that’s the fact that with these, you know, day seven ROAS campaigns and value optimization and event optimization campaigns, Facebook with all of its data and AI in incredible targeting efficiency has kind of, in some ways been doing the job of developers. It’s been finding. Those unique profiles, user profiles of who’s actually going to spend money.


Who’s actually going to enjoy the app. And, and it’s like, in some ways they, they became this really efficient black box of user profiling and understanding users that developers had kind of in the past done. And then maybe now need to get good at again in the future. know, again, you’ve written about this before, but just describe that process, maybe a little better of, of how amazing Facebook really was at finding the best users for an app.


00:34:51 Eric:


Well, they were very, you know, as you said, very, very good at it. Right. So, you know, it was based on like an approach that is, was very, simplistic, right? I mean, I just gonna, I’m gonna, if I can observe everything, then I know everything about this user and I can just target most relevant ads to them.


Cause I know everything about what they interact with. Right. And I know what they like and you know, it gets to a point where that, that that ability to observe is so pervasive. That I, I do agree like that, that had, gone too far. Like the pendulum has swung too far in that direction.


Like it is not, I find it unsavory to think that like, literally everything I do on my phone is observed and instrumented and ingested as a data point by one company. Right. Like that’s, I’m uncomfortable with that. So, you know, and, but, but like, I think, you know, to your point, like going, you know, if you go back to when, when UAC was introduced, right.


So Google their mobile product UAC is that’s they describe it. I think that they themselves describe it as a black box as like a selling point. Right. Because it’s like, look. Worried about any of that, you will handle all of this difficult analysis for you. We’ll find the best users for you. You don’t have to iterate across audience, definitions, or even creative, you know, and do all that experimentation yourself.


We’ll do that on your behalf with our superior tools. And when they announced it, there was a lot of, you know, disquietude in the, in the developer community. Cause people are like, look, we built this. We want to do it. I don’t trust you to do it. I trust you to do it well, but I also trust it to do it to your advantage.


Right, right. To pursue your best interest. Not necessarily mine, what I think you’ll do. So this is, and this is exactly what these platforms do is they sort of, they take whatever boundary you set or whatever standard you set around efficiency. And they, they reached that. Right. They’ll they’ll get you to exactly what you say is like the sort of quality threshold or the efficiency threshold for your campaigns to keep spending money, but they won’t give you any more than that.


Right. So they could blow out your campaigns and get you 400% real ass. but if you told them you only need 110 by day seven, that’s what, that’s what you’re going to get. And if they get you to that 400, then they’re going to buy you a bunch of crappy traffic that brings the sort of average down until it hits that one 10.


Right. And so, you know, that’s, that’s the power that they had, which, you know, to be fair, it’s like, they were really good at that. And they would probably be, and, and, and them being really good at it. And then, and then present and providing that as a product productizing that and making that available to everyone.


Meant that anyone could spin up a Facebook campaign, you know, any, any Shopify retailer, any Shopify merchant, any small time app developer and spend money and grow their product, grow their audience, right. Versus go back to 2012 and like, you know, the best UAA teams won. And, and a lot of times these were like big teams, big companies that raised a lot of money.


You know, now, you know, it is way more egalitarian to open it up to anybody. And, you know, the small shop owner, in, I don’t know, the middle of Kentucky or whatever could, could have access to this world-class machine learning infrastructure to grow their business. Right. And then they only really had to compete on the quality of their product and not the quality of their user acquisition infrastructure.


So in a way it was, I mean, it was a giant gift to these SMBs and, and if the proof is in the pudding, look at Facebook’s advertiser mix, 10 million advertisers, vast majority SMBs, right? 10 million average. Right. Think about any company that has 10 million customers, that’s just an absurd scale. Right?


And these are people spending, you know, in aggregate tons of money on Facebook. So like, it made sense, but, but, you know, there was a lot of pushback when UAC announced that. Cause developers said, look, we, that was our competitive advantage. Like, well, should it be, if we go back to basics and everybody has access to the same quality of infrastructure and the same quality of like, sort of like, you know, marketing tools and then you can be on the basis of your product.


00:38:49 David:


So then are we kind of going back to that world? I mean, after I think transparency is going to degrade, Facebook’s targeting efficiency because they’re not going to have that pervasive tracking where they know everything that’s going on on your smartphone. So, so where do we go from, from here as far as, you know, what developers need to be thinking about?


And, and I forget exactly when you were at this post, but, but I really appreciated you. You kind of talked through some, some tactics even around. developers needing to get better at capturing intent about potentially kind of bifurcating experience in the app is that we’re we’re developers should be headed of, okay.


Now Facebook can’t bring me the perfect user for my app as it exists today. and instead developers need to get back to the basics of understanding their user base and kind of building out those user profiles and understanding who they should be going after. Is it, is that where we’re headed?


00:39:48 Eric:


I think so. I mean, I think we talked about this last time I was on this podcast, but like, you know, so when I wrote my book, Freeman, economics, I mean, this was like 2013. Right. And so this AEO didn’t exist yet. You know, VO was didn’t exist yet. This was, you bought installed. Right. And the idea of freemium or my sort of thesis with freemium is that like, it gives you the ultimate power to personalize.


And so you need some minimum scale because you need a minimum amount of people to experiment with in order to make, you know, some small percentage of people that do monetize meaningful to you. but in order to do that, you need like a sort of like very large surface area for experimentation, right?


You need a lot of content to be able to test against people and make sure that, you expose to them the exact perfect thing that they want. And in order to do that, you eat a lot. And so what ended up happening was that idea of flip. And it, and it became less about doing that in the product and more about doing that with the creative, right.


And allowing Facebook to do that with four year on your behalf with the creative, then they found the perfect user and you need to do any personalization in the app because they probably the perfect user just make the app for the perfect user, that individual profile, that one profile. Perfect. You make that app, Facebook will find those people through like mass, you know, wide-scale experimentation with creative.


Well, now it’s flipped again. And so, you know, when someone comes into your app, you don’t know who they are. You don’t know how qualified they are, because the targeting has been degraded to the, to the point where, you know, th th there’s, there’s not a whole lot of, of sort of like operatory, you know, relevancy that you can Intuit there.


And so you’ve got to parse that out from their behavior, show them something, see how they react to it. If they react positively to it, show them more of that. And if they don’t show them more. And, and that kind of personalization though. I mean, it was very powerful and I talked and that’s, I wrote a whole book about it, but it’s hard to do.


You need a big team, you need data infrastructure, you need that’s, that’s the thing. And then you revert back to like, well, only big developers can do this. Right. And so you’ve kind of just edged out the small guy. you know, the developers that are just like a couple of people and they got to just whiff, or they, they got to take a flyer on some idea, and they better hope that it works right.


Versus being able to kind of iterate into that and provide one app that gives like personalized experiences to sort of everybody that comes through.


00:41:56 David:


Yeah. So then those, I mean, what would your advice be today knowing that you can’t just, you know, throw a hundred grand at Facebook and let them figure out your perfect user? How, you know, if you’re, if you’re building an app today from scratch, or let’s say you’re at 20 or $30,000 in MRR and you want to make that leap and really grow, what do you do?


00:42:18 Eric:


Well, I think so. I mean, in that post, I mean the one thing that is, you know, it’s a worthwhile exercise, but it is trying to instrument these, these signals with the conversion values for SKAdNetwork. Now, the problem with that was, you know, going into this before NTT was launched and, you know, I worked, you know, I worked with some companies to do this and it’s like a data science exercise, right?


You just, you, you run these, you know, you go back and you have like, kind of look back models and you find out what the commonality was amongst people that ended up being good users. And you try to surface that in the app and you encode that as a signal for a scanner. The problem is going into that exercise.


You’re thinking that sci network was like a good faith solution. it made sense, but now we realize, well, we don’t even know when they’re going to te when they’re going to, how many of these we need to trigger before they even start reporting them to us. Right. And so like, it’s like, okay, well, that’s not really an option.


You know, I think the other thing is, you know, you approach this as more of like a product marketing, you know, project and just trying to figure out who your audience is right here. And that’s like, going back to basics, that’s saying, okay, like, what are the demo features of the groups that like this type of product and that’s what I have to target against.


Right. And then just, and then trying to get, you know, cause you can’t do mass creative testing anymore, at least on an iOS. And so, you know, trying to work out some pipeline of like, we try concepts on Android where we can still do kind of mass testing and then we promote the, the conceptual winners to iOS, but then we’ve got, you know, fewer, various success there.


So we’ve got to kind of adapt that for the iOS environment. Like it’s just, you lose a lot of, there’s very lossy that each time you, you sort of transfer some sort of component of understanding from a totally separate platform. To iOS and then from iOS to like different environments to, to other environments on iOS, you just, you lose signal there, you lose precision.


So I mean, it’s it’s, but that’s it right. And then, you know, trying to get away. So I think another thing is that, you know, you talk to some of these companies and Facebook had become like kind of a drug for them. I mean, it’s just like they were addicted to it. and it was just so easy to only use Facebook, right?


Because you could accomplish everything you want it to, but you know, that’s a classic, you know, sort of, that, that that’s a classic sort of blunder from, from just a commercial perspective. You never want to be totally dependent on another platform. You know, now Facebook didn’t make this decision.


Apple did, but, you know, nonetheless, you know, your sort of devastated by it, right. Because of that dependency. So I think the other piece of this is just trying to, is doing, doing the work you should’ve done a long time ago, which is diversify your traffic mix. Right. And that’s actually kind of difficult because Facebook, again, they did all that creative exploration for you.


You know, they have such a broad user base that you could find all these different groups in scale, right at to, to scale like these even niche audiences, niche, look, any, any sort of like niche for X strategy game. You find enough people to build out, a big da you base and that’s not true.


I don’t the other platforms. Right. And you got to really nail the form factor for those like snap is totally different. Like the way to approach the app is totally different. The Facebook, the way to approach tick talks to even snap, right? The way to approach Outbrain, Taboola totally different than any of those.


You know, the way to approach YouTube is even different. Like every, all these, these are very, you know, particular, unique, channels and, and, and the way that the ads are are exposed in the products is different across them. And so you’ve to, you’ve got, gotta go through the work and the investment it’s, you’re investing in a data and, and, and sort of institutional knowledge.


And all was never went through that exercise because it’s like, I can just


00:45:46 David:


Right.


00:45:46 Eric:


Spend more Facebook.


00:45:47 David:


Yeah. And, where do you think organics fall into this mix? I know, like we talked to all trails on the, on the episode before that I said, not only are they a unicorn app, likely evaluation, but in, in their success with organics, I mean, there are apps that just find incredible success with that, right.


Kind of search optimization or finding that right niche that really drives organic installs. Where do you think the average app should be placing organic and how much focus should they be putting on trying to get some of this free attention and build, you know, user generated content and links and things like that.


00:46:35 Eric:


I mean, do it to the extent that you can. I mean, why not? you know, I, I don’t think you’ve got to choose one of the other, right. I mean, you should be ideally maximizing the effect of both of these strategies, but I will say one thing it’s that you always have to turn on paid UI, right. You’ve always got to turn on paid marketing.


There’s varying, you know, sort of, timelines, you know, over which you have to confront that reality, but it is reality. You’ve always got to turn it on and like, I’ve done enough, like advisory for like private equity funds and just big companies that are looking to buy other companies.


And it’s always, the reason they bring me on is because I’m going to say, we could triple this business. If you did paid UA, right. We could cut Drupal this, like how, how, how much, how much bigger could this get? Right. And you know what I mean? Like, there’s always a point where they’ve capped out. They never developed this, you know, expertise.


Internally, right. It never became like domain knowledge that they possessed. And for that reason, there been a lot of false starts. Cause it’s like, well, we can always sort of lean back on organic and it’s going to take time to spin up paid and they bring someone in. And within two months they haven’t really materially improve the business and they spend a bunch of money.


So they get fired or, you know, they get the budget cut and they quit. And then they do that three more times and then they realize we’re stalled out in growth. and no one wants to come work to be our CMO because like, it’s pretty obvious that they’re not gonna be. You know, the full freedom and the only way to sort of like break out of that cycle is to have the company get acquired right by a private equity fund is going to say, yeah, we’re going to bring in a CMO and you know, these management’s kind of gone and, or they’re gone, but, or they can stay with it to play ball with the new, you know, the new execs and, and we’re just gonna spin up paid marketing and that’s, and that’s how we grow this asset and that’s how we make our money.


So I’ve just been on enough of those deals where you always turn on page away. If you, even, if you, even, if you think you never will, it happens, you know, outside of your, approval.


00:48:28 David:


Yeah. I didn’t mean to phrase the question anyway, that made it a black or white that you had to choose one over the other. And actually I was, I was trying to, to, to kind of, throw a softball at you, because I think your, your thinking on this, is great in that the sooner you do spin up some level of paid marketing, the sooner you, you can understand the different audiences that are going to be coming into the app.


And, and that’s something that you’ve talked a lot about that I think is really fascinating. Yeah. If you can find a good organic channel, go for it and bring traffic in, but know that when you spin up ads, those that traffic is going to look different. They’re going to convert different. They’re going to be interested in different things.


And if you, yeah, I’m stealing your, your kind of playbook here. So yeah. Tell me why you think. even if you do have a very successful organic channel and maybe that’s the strategy, you kind of get from 10 K a month to a hundred, 300 K a month. But to get from there to the millions a month, you’re going to have to spin it up.


So what’s the playbook for, for kind of building that expertise in house. And when do you start, when do you have to start ramping it up?


00:49:43 Eric:


So thank you for reminding me of my thoughts here. so, so the idea, the idea there is like, organic’s never going to be the ultimate scale channel, right? Like it’s gonna, it’s gonna, it’s, it’s gonna, you’re gonna reach some sort of asymptote with growth there and it’s gonna flatten out and probably at, you know, if you kind of close your eyes and you pictured your app at like the sort of greatest potential, right?


Th this sort of like greatest sort of like intrinsic potential paid is 80% of daily, you know, new users, right. Or 60 or whatever, but it’s a majority. And so if you’ve only. You know, grown via, you know, just sort of like organic traction and organic like magnetism, and you’ve, you’ve gone through like many sort of cycles of app or product iteration to sort of optimize the product for that group of people that do look distinct that will look distinct from people that have responded to some kind of stimulus, right.


And have some sort of intent, sort of like, you know, driving their, their adoption of your product, then you’ve optimized for the group. That’s that at the greatest potential scale of your, of your product is in minority. Right. And what you really want to do is you want to optimize the product for the majority, the, where all the growth, where the growth can be, right.


And so that, you know, if you delay layering in pay traffic and you, and you delay, then you delay understanding what they want out of your product. And the sooner you bring that in the sooner you can sort of, Optimize the product for them, the more efficient your pay traction will be, and you’ll get an organic halo effect from that.


Right. And so like, it’s like, well, the sooner that you do that, the faster that you sort of reach that, that sort of, you reached that potential on the organic side. So it’s more about like, are you thinking about like how, I mean, an exercise that I always love to do is it’s just like pause and think about like, what would success look like?


And for most apps, success looks like, yeah, we’re spending a ton of money on paid you way. And there’s a lot of organic too, because that’s just a function of being a successful app that a lot of people know about, but, but we’re spending a ton on UI. That’s a good thing. That’s not a bad thing. It’s a great thing.


And so, but, but the majority of our users came in through paid UA and so we’ve optimized the app for them. and so we’ve, we’ve, we’ve made the economics better over time. And then the other piece is like in a, talked about this a lot too. It’s like, you’ve got to change it. Over the life cycle of your app.


It, because you know, a lot of times what you see as, you know, you see an app that’s new they’ve got like explosive growth, right? And you look at the, just like a kind of stacked, a bar chart of the cohorts by age. And it’s like, well, on any given day, the vast majority of users are new or they’re less than a month old.


Right. And then like you go, you fast forward two years or three years, and a really good app, that’ll be flipped because you’ve, you’ve retained people. The vast majority of people that use your product every day are old. I mean, in terms of like when they adopted your product, because it’s sticky because it’s retentive, right.


And that’s a, that’s a great place to be. But that, that you’ve got to change the way that you think about product optimization at that point. Like when you’re going through the product iteration process, like, well, you’re not optimizing for the newbies anymore because there’s way fewer than you got to keep the old timers involved and engaged and.


Right. Cause, you know, that’s just where the vast majority of your revenue is coming from. Right. And, and, you know, and, and at that point you’ve probably reached, you know, some proportion of your Tam. And so you might not even be doing new user acquisition as such anymore. You might be doing a lot of retargeting re-engagement.


And so it’s just like, you gotta be very conscious of like the life cycle of the app, what the, what the user base looks like in terms of composition by age and like all that kind of stuff. And it just, it just takes a lot of consideration and it’s it’s, you know, and if you get to any point where like any of those, any of those distributions is skewed to an extreme, to an extreme one direction or the other, you probably got a problem.


Like if you’re all organic, you’re not you leaving money on the table. If you’re all old timers, when you’re not growing anymore, if you’re all 


00:53:39 David:


Right, 


00:53:39 Eric:


Retaining enough. Right. It’s like all these different levers that you got to pull to make sure that you hit the optimal sort of combination.


00:53:45 David:


Yeah. That’s great stuff. I love the way you put that too. I think there is some level of magical thinking that if I have just the right app, I never have to do marketing, marketing is a dirty word. Spending money on marketing is. It is wasteful or only companies with bad products have to do marketing and that’s just not true.


What’s especially funny. a lot of these folks or indie developers who hold up Apple to be the end, all be-all Apple spends tens of billions of dollars on marketing, Apple measures that mar

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Her most recent book, “The Forever Transaction” is a deep dive into everything consumer subscription, and a must read for anyone in the space.In this episode, you’ll learn: Identifying and attracting lifetime value customers How to get and maintain customer loyalty Three causes of subscription fatigue Why customers cancel their subscriptions Links & Resources Strava Intuit Survey Monkey Oracle The Subscription Economy Tien Tzuo: Subscribed Eric Crowley Seth Miller CrossFit Shopify Calm Matthieu Rouif PhotoRoom GoPro Elevate VSCO Robbie Kellman Baxter’s Links Robbie Kellman Baxter’s website Follow Robbie on Twitter Robbie’s book: The Forever Transaction Robbie’s book: The Membership Economy Robbie’s LinkedIn Follow us on Twitter: David Barnard Jacob Eiting RevenueCat Sub Club Episode Transcript00:00:00 David:Hello, I’m your host, David Barnard, and with me, as always, RevenueCat CEO, Jacob Eiting.Our guest today is Robbie Kellman Baxter, consultant, keynote speaker, and author. She’s advised many of the world’s leading subscription-based companies, including serving on the advisory board of Strava. Her most recent book, “The Forever Transaction” is a deep dive into everything consumer subscription, and a must read for anyone in the space.On the podcast we talk with Robbie about finding your super users, the real reasons for subscription fatigue, and why pricing isn’t as important as you might think, especially early on.Hey Robbie, welcome to the podcast.00:00:58 Robbie:Thanks for having me. I’m excited to chat with you both. 00:01:00 David:I was introduced to your work by somebody recommending your book, The Membership Economy, and it really struck me. I was so excited that you agreed to be on the podcast, because here’s a book written in 2015, and we’ll talk about your other book that was written more recently, but written in 2015. I was looking through it, scanning the chapters, so I bought the book. I was like, this is everything we’re talking about now, thinking it’s all so novel with subscription apps, but really consumer subscriptions have been around for decades. You’ve been working in this space way longer than any of us.So, I thought it would be really fun to have you on the podcast to talk more broadly about these principles of consumer subscriptions that apply equally to D to C subscriptions, as well as the app space that we work in. That’s where I wanted to kick things off.So, how did you get your start in consumer subscriptions?00:01:57 Robbie:A couple of threads came together. I was in product-marketing for what is now called SaaS, for five years, right before I hung out my own shingle and started consulting. So, I had that background as a product manager working with software products that were being sold as subscriptions, and then as an independent consultant.My fifth client was Netflix. I fell in love with their business model, and I was wondering why isn’t everybody else falling in love with their business model, too? This is amazing. Recurring revenue, predictable cashflow, the amount of data they were collecting on their customer. The fact that they’re offering was just a much better way of delivering on a promise that many of us wanted delivery for, which is a professionally created catalog of video content delivered in the most efficient way possible. It meant not having to put a raincoat over your jammies to go pick up a movie, with cost certainty and no late fees.I was consulting with Netflix. I was already a customer, and a few people started calling and saying, “Hey, we heard you worked with Netflix. We want to be the Netflix of our space.” Whether that was news, or music, or bicycles, or dental pain management products, or clothes, there was a lot of interest in what it was that Netflix was doing.So, I started trying to create frameworks, trying to say, what are they doing? Which parts are applicable to other businesses, and which parts are just unique to that group of people solving that particular problem?That’s really where I got started, and it turns out to be big enough and deep enough that it’s kept me really busy for, it’s been 20 years, 20 years. 00:03:55 David:Fifth client to, to land as a consultant. That’s a. Really great. And so you were with them before they even introduced the, video on demand on the internet, right. You started with them when it was DVDs in the mail, 00:04:09 Robbie:Yeah. 00:04:10 David:Traditional D to C subscription service. 00:04:13 Jacob:But, but even then was satisfying a lot of those, almost all of those conditions. Right. I didn’t have to go outside just to my mailbox, not too bad price certainty. I didn’t have late fees. and then like, you know, insanely large catalog. Right. you know, it was, it was, it wasn’t. We tend to wait for the technology to get that right.And then, then we had VOD being, 00:04:33 Robbie:Yeah. And they were already thinking, I mean, it was amazing to me. So I was there, you know, the time that I worked most actively with dev 2001, 2003, even during that time, which was all DVDs, all three DVDs out at a time, they were already thinking about streaming versus, you know, should they let you download it?And then have it explode after, you know, you know, some duration. What was the best way to deliver it? Should they come through your, you know, for awhile? I remember I think it came through your PlayStation or your, your we, were thinking like, 00:05:06 Jacob:My first like set top box experience with Netflix would have been on Nintendo. Yeah.00:05:10 Robbie:Yeah. I mean, so they, they were already thinking about it and I think that’s a really important part of any subscription is even if your subscription works great today and it’s good enough to get people to sign up the product team has to be thinking, how are we going to continue to evolve it in particular fringy? Right. How do we continue to stay relevant to these people while also having those new and improved features that bring new people in? And I think a lot of organizations. I have been taught to over-index on acquisition benefits and not thinking as much about those, the sticky engagement benefits that often are really hard to talk about credibly. Right? If I say to you, you know, sign up for my subscription, my, my video subscription, because it’s the most, it’s the easiest to find the next piece of content. And you’re going to love our algorithm, right? People aren’t going to believe you. You don’t have credibility. So, all they’re going to say is, oh, you have Hamilton, I’ll sign up for that.And then I’ll cancel. And then it’s still up to you, you know, if you’re Disney plus to get them from Hamilton to princess movies, national geographic titles, ESPN, all the other great stuff that they have. Star wars.00:06:26 David:I’m 00:06:26 Robbie:Yeah. 00:06:26 David:My son right now. Yeah. That’s great. And then I do want to kind of step back and you’re kind of right into the weeds with some really actionable advice, but I want to, I want to step back a little bit and talk more broadly. So after working with a few, companies in the subscription space and Netflix so early eventually wrote this book, The Membership Economy, which I love.Phrase and wanted to ask actually, did you, did you coin that phrase then how did you at the time and how do you still kind of define this membership economy that you wrote about. 00:06:57 Robbie:Yeah. Well, first of all, I’d love to say that, like I just came up with it and it was so natural and obvious, but, you know, I was thinking, I was like, is it, is it about subscription pricing? Is it about premium services? Is it about recurring revenue? Should I call it the recurring revenue that I was trying to think?What is it? And where I came out was it’s not about the subscription pricing, which I think is a tactic. it’s a tactic that you earn the right to do by having. Relationship that is trusted with your customer. The customer trusts you so much that they’re like fine. You can charge me every month or you can charge me every year and I will just keep paying you and not look for alternatives.And for me, that was based on a certain kind of human relationship. And that’s where I came up with this concept of membership that you belong. That it’s, you’re committing upfront to a long-term relationship as a vendor, and then you earn the right to have subscriptions. So that was kind of where I came up with it.I worked with Netflix. I also worked. At that time Intuit. I worked with a survey monkey and their predecessor. Uh Zoomerang and I worked with Oracle on the B2B side, and those were some of the companies that helped me sort of connect the dots and figure out how. The framework, of, you know, here’s some ways to think about what happens when you treat your customers like membership members.Here’s what you need to track. Here’s how you need to think about it. And here’s what it, what it can do for you. Honestly, the first book, all I was trying to do is say, this is a good idea. You might want to consider it for a bunch of reasons.00:08:26 Jacob:Think of it in opposites. I think it’s is it the. the Zuora founder’s book subscription economy,but but you’re right in the sense that subscription kind of implies like 00:08:37 Robbie:Okay. 00:08:38 Jacob:Particular tactic for monetization that does go really well with this concept. But when I think of membership, as opposed to just subscription, like membership implies also community to me, right.00:08:48 Robbie:Yeah. 00:08:49 Jacob:Like building this. This, this ecosystem, this community that, that, which was then in genders trust, which then allows you to monetize, right. And and this great business model. about it in those terms, I think is a really nice way to put it as opposed to like, let’s take something.Let’s take something that, that we were monetizing another way and just slop noodle on it, which is something a lot in the, in the app world, this transition from paid upfront or micro-transactions driven apps to subscriptions, some have made it and some have not. And I think the ones that have made it are the ones who look at it in that light, in the membership light, in the.Earning their business repeatedly through content or through community. so I, yeah, that, that framing I think is really accurate.00:09:36 Robbie:Your point about, you know, so many companies to slap a subscription price onto whatever they already had, you know? Okay. We have a usage based model. Let’s see what happens if we do a subscription based model for the same product, or let’s see what happens if we take, you know, a model where you have ownership, where I download the app and it’s mine, and I can use it forever, even if it’s really, really obsolete.If it solves my problem, who cares, to one where you’re being forced to pay every month. Yeah, extensively to get upgrades and maybe access to your peers and some kind of community functionality. It really is a different product. You need a different product for subscription than for, you know, a purchase or usage based model.And, you know, I love teens books. Subscribed is a great book. I recommend it to people. It’s very, well-read has a lot of interesting ideas. but I didn’t go with that, you know, subscription economy model just because I really want. To focus more on the culture and the relationship and not jump straight to let’s get some of that subscription pricing stuff so that we can get a good valuation, you know?00:10:39 Jacob:Yeah. Yeah. I, it, you made me think of this one experience I had just as an anecdote was, X-Box in for three or four years ago, released an Xbox subscription. And I thought this is a really cool one because I could defer, I buy another X-Box every three or four or five years. So it was like, oh, I’ll just spread that cost out.I didn’t have a lot of cash at the time. I was like, this is a great 40 bucks a month. I get a new Xbox, right. And so I went in to do this at the, at the Microsoft store. What it really was, was they were giving me like a cash advance, like they were giving me, like, basically I had to get a credit check to get a subscription.And I was like, this is 00:11:12 Robbie:That’s not a subscription. 00:11:13 Jacob:In mind. Exactly. Right. Like I thought I was joining the, the X-Box club and I was going to just get an expert and they’re going to place my Xbox for me. Right. example. of that case of just like slapping subscription pricing on what was essentially a loan.00:11:26 Robbie:Yeah. Yeah.00:11:27 Jacob:Now my credit score, I have loan for a 19 20 16 Ford edge and a next box, on those are my two like credit items I’ve ever had. So it’s really weird.00:11:37 Robbie:And they’ve come a long way. I mean, Microsoft has come a long way with their subscription strategies, you know, not just on the gaming side, but you know, with, with office 365 and you know, they’ve done a lot of thinking about subscription, but it really is super complicatedto, to make it work. 00:11:54 Jacob:Right? Like with software zero marginal costs or whatever you can It makes a lot of sense. will say, I will say, I want to give Microsoft some credit, back in the gaming world there Xbox game pass product product, which I also subscribed to has been amazing.I bought a new X-Box game in forever, cause I don’t really care about title individuality. I just, whatever it is, $10 a month or $15 a month. And I get access to like 50 different games that rotate. Plenty. That’s plenty for me. And I will probably never unsubscribe from that. Right. But it feels like a 00:12:22 Robbie:Yeah. 00:12:22 Jacob:Cause it’s, software-driven, in there. There’s like there’s changing and there’s events stuff that comes in and out and they make it a big thing. built it up into this, into this. Yeah. This kind of, it feels like a membership, as opposed to, yeah, just slapping an affirm loan on an X-Box purchase, basically.00:12:39 David:I do want to step back to your, to your book, The Membership Economy, and, I love the subtitle. Find your super users, the forever, transaction and build recurring revenue. finding super users is something we’ve actually talked a lot about here on the podcast. So looking for those cohorts, one of our recent podcast, guests, Eric Crowley.Talked about locals versus tourists. Seth Miller, another recent podcast guests talked about how, you know, figuring out these cohorts was just a huge unlock for their business. so what’s your process? How do you recommend clients find these super users and how do you think about these, super users?You mentioned all the way back in 2015 before any of us were thinking about these things.00:13:24 Robbie:Yeah. Well, so for me, what I think about with super you. So I think about, you know, anybody does subscriptions knows. Segmentation is like re like the most important thing. You have to know who your customer is. Not just at the moment of acquisition, what they look like. You know, when you’re like, that’s the person I want, but how are they going to behave once they join?The moment of transaction becomes the starting line for understanding your customer, not the finish line. What like, oh, we knew them well enough to get them to buy it. We knew them well enough to get them to buy. And then to get them to make this a habit and then to get them to go deeper and to stay for a long time and maybe even bring their friends.So, you know, the first thing I always do with my clients, I say, let’s focus on who you’re, who you’re making the problem. What is the promise you’re making, who are you making it to? and that’s kind of part one. And then we map out the journey. What is it? What is the goal that they have that is ongoing or the problem that they have that is ongoing?And what are the moments on their journey where you might be able to intervene and help. Right. So in the beginning it might be just one or two places, right? I’m I’m, I’m QuickBooks. I help you at tax time, but then it might be, oh, and I’m going to help you with some other key moments in your process of adulting financially.Right. You know, one of the things is you move at your parent’s house and you pay your own taxes. Another is you might take out a loan for that. Awesome. You know, for whatever car you said, you know, you’re going to get an, get a car and you need a loan and you know, they can help you. And so you’re layering in those different beds.On a journey cause you want them to stay. You want to keep providing value. and then once you know what that person looked like, then you go tell your marketing team to go get lookalikes, get more people like that. Super users goes one step beyond that, which is not only are they great customers, you know, high customer, lifetime value, easy to serve, whatever.They also were putting their own money and effort, their own resources into strengthening your model. So these are people that bring in. These are evangelists who bring in other members. These are people who give you feedback on your products and services, which sometimes doesn’t feel like a gift, but always is a gift.And it’s, people who are willing to help onboard. New members. Right? So the ones that, you know, explain in the user group, you know, that, you know, this is, this is how you use that product, or this is, this is my workaround, or this is, you know, what was hard for me and how I fixed it. So those people, you know, that make referrals, that that speak out on your behalf that gather, you know, others they’re so valuable.And I got really into this idea actually with CrossFit. my sister is a, is a big CrossFitter and watching her. in addition to all the money she was spending to, to be a member of this CrossFit box, the amount of time and effort she was spending to onboard new members to invite them over. When the, when the box was closed, she and her husband would put out their equipment on their live on a cul-de-sac.They put it all out on the street and invite the whole box, come over and get their workout done there because they love the community so much, right. Their own time and money to support the community.00:16:27 David:There kind of specific, Ways, especially digitally like, with, with or customer service, what are the tools that, that you see people be successful in finding those kinds of users and understanding those patterns and who they are and what they 00:16:45 Jacob:Yeah. 00:16:45 David:Like. And those sorts of things. 00:16:47 Robbie:So the, the starting point, I think is always lifetime customer value. So. You look at the group of customers who stay the longest and spend the most right. And the ones that people would say, we wish we could make more of these, you know, and then you look, you develop hypotheses. What does this group share?And it can be as simple as writing the names of your first 10 customers on a boards. These are the 10 customers we had. These five have been awesome. These. You know, didn’t stick around long canceled, complain a lot, you know, whatever the reason is. And then you try to come up with what is, what did this group share that this group doesn’t share?That’s the simplest way in a, in a data world where you have the data you’re doing the same thing, but digitally, how did they onboard? What was the source of the lead? what time of year? Like which cohort are they in? Did they join? You know, people like, for example, with QuickBooks people that join in tax season, Might be behave very differently than people who join as a new year’s resolution or who joined in August.Right. What kind of person starts thinking really hard about managing their money in August? Great. you know, so, so looking for those things, developing hypotheses, looking at the data, trying to say what’s the difference between our most valuable customers and our not most valuable customers, which is not your worst customers, because your worst customers are often outliers, but just the ones where you’re like, they’re just not that good.They came for two months, they left, they binged, they used up, you know, they were using us really heavily for six weeks. And then they left. What’s different about them than the ones who continue to use this gradual. For five months. and I think that’s where the hypotheses come out and then tactically, what you do after, you know, as you look at the difference in onboarding those different groups and you optimize your onboarding experience.To build those habits and then you mark it. This is often requires a tremendous amount of discipline. You mark it to only attract the high value people and not to attract the others. So if I walk into McDonald’s with a gown on with my husband and I say, it’s our 20th anniversary, show us to your finest team.Give us the best you’ve got. And we’d like a nice bottle of champagne, right? Customer’s not always right at McDonald’s. Right. They’re not going to say, oh man, Robbie needs champagne. Somebody scraped down to the seven 11 and you know, get a bottle of Prosecco and you know, we’ll try to pass it off. They say, that’s not really what we do here.Dummy. They might not say dummy, but they might be thinking it, right. That’s not what we here, you know 00:19:10 Jacob:The 00:19:12 Robbie:Right. We’re here, you know, we’re cheap, we’re fast. It tastes good. Your kids love it. You can drive through and eat it. But we don’t do, we don’t do special occasion stuff. And so they know who they are.Right. And they’re okay with me not coming in. Right. They’re even okay with me saying, by the way, don’t go to McDonald’s, it’s a terrible place to celebrate your anniversary. Right. They’re kind ofCause it. 00:19:32 Jacob:Just all 00:19:33 Robbie:Right. The leaning is terrible. It makes your skin look awful. You know, the point is that if they took care of. Right. What am I going to do? I’m going to tell you, you know what, just go there for your anniversary. Just tell them it’s your anniversary. They’ll run out and get all the stuff you need. Right? And then they have all these people that are expensive to serve. Right? It’s the same thing digitally, right? If you bring in the wrong people who are going to binge on your content in the first month, or the people who are going to push you to create features that nobody needs, except that.Right. It’s just going to throw your whole business off in the wrong direction. So having that discipline upfront to know what you do and you don’t do well. And to say no to some prospects, it’s really hard to say no to prospects, right? If they have money and they’re like, just add this feature and I’ll pay.You know, Netflix in the early days, a lot of people wanted them to have video games. Right? Video games were also on discs seems easy, right? As an outsider, as an expert, right? I’m like, ah, video games, same thing. Video games work in a totally different way. And what Netflix said is we don’t really understand how people would view.Games. We don’t understand how they’ve use them. We don’t understand how many we need. We don’t understand how they value that. We don’t understand how to negotiate terms with gaming companies, but that’s a whole different thing we’re going to, we have plenty of runway here. Just focusing on video content.00:20:51 Jacob:Yeah, it’s, it’s really interesting that, that, that feeling as a founder, especially true in SaaS, when you have literally 10 customers and like you will do 00:20:59 Robbie:Yeah. 00:21:00 Jacob:For the, your 11th, it’s a little bit true in consumer. Two in the early days, like you, you’re just kind of like, how do I get the funnel bigger?How do I, how do you, I think you are a little bit myopic on, the top of the funnel and not thinking about this long-term thing, partially because we don’t have a lot of data. You launched your app six months 00:21:19 Robbie:Yeah. 00:21:19 Jacob:Trying to make decisions on customer lifetime value. And you don’t really have a good sense because you don’t know who’s sticking around.You probably don’t have a ton of data, but one thing you said. That really got my gears turning was that of putting them on a board and just looking at them, looking at the 10 customers or whatever it is, a hundred, even in consumer SaaS, where you have hundreds of 00:21:37 Robbie:Yeah, 00:21:38 Jacob:So it’s not that many, you can grab it.You’ll be surprised at how many things I’ve in my old days in consumer’s house of like just clicking into a customer and just watching how they use the app, like an individual, right. It doesn’t, not data, but it gives you hints and you can start there. And then, and 00:21:54 Robbie:Yeah. Hypotheses, right? 00:21:55 Jacob:Yeah. Hypothesis. And then you actually talk to those people, if you can, like get them on the 00:22:00 Robbie:Yeah. 00:22:00 Jacob:Surprised what they tell you. One of our, our guests Matthew and photo room a few weeks ago talked about, they would take their app to McDonald’s and just show it to people to keep the McDonald’s references going, and get like in-person feedback.And that helped them learn, you know, they, they were, they were an app that thought that. For everybody and find out later that they’re actually like, kind of like a pursuer app for Shopify people, people 00:22:23 Robbie:00:22:24 Jacob:And people with, with e-comm and, and that like kind of exploded their business for this exact case.You’re talking about where they found out. Okay. Yeah. We’re not for this entire, like long tail of low intent users where for this really core set, but that can be really scary if that sets kind of 00:22:39 Robbie:It’s always scary to niche down, but it’s almost always. a good strategy. And I wanted to tag onto something else that you said, Jacob, which I think is really important. People often say, how can I make any decisions about, you know, based on, you know, who has the highest customer lifetime value?When, you know, we’ve only been around for three months or six months, we have to wait until they leave. Hopefully not for three years or five years, but what I’ve found. And, you know, I wonder if you’ve seen the same thing. Most people who leave leave in the first two months. So what you really want to do is optimize for onboarding, you know, are they adopting habits that look like people who are steady users getting value, and you can often tell that in the first month, by how many people drop off by who stays and buy, you know, are they bingeing or are they using it in kind of a normal way? And so you don’t have to wait for 18, 18 months or however many periods, a lot of it, you get your answer right away. Do they cancel at the end of the first period?00:23:43 Jacob:Yeah, it’s good to think about your product in terms of not just. Like signups and getting through the end of onboarding, like that day one experience, but think about what hooks are like, what are the things that people are actually investing contingent on? I always think that that’s, that’s a, know, you think about this long-term relationship, giving users, in your product to invest and to give back and to connect, like putting in 00:24:05 Robbie:Yeah. 00:24:06 Jacob:Themselves.Like there’s passive usage consumption. Netflix does a good job. Like you can save, listen stuff that they do a lot of this just in passively, right? Like you consume content and they learn about you and then they have a profile. but I think some of the best apps, like let put in and that’s going, gonna also not only probably make them stickier users, but also it gives you early indications and some things to hook on and be like, okay.I mean, Dropbox, this was a big thing in Dropbox. This story. they, they could get people to like understand the concept, but we had massive product issues, getting people to put a file in the thing, right? Like 00:24:41 Robbie:Yeah. 00:24:42 Jacob:Not necessarily the most user friendly thing. Like is some sort of app that runs in the background whenever they would, they did, they pulled users in, they watched them do it and totally fail.And then they fixed the product. Right. and, that’s, that’s. core product problem, but it relates to this this story of getting somebody to membership, right? Like getting them 00:25:00 Robbie:Yeah 00:25:00 Jacob:And focusing on that.00:25:02 David:One of the things that you talked about in your most 00:25:05 Robbie:No. 00:25:05 David:That I think, is so important to understanding the activation. Is is this concept of a forever promise. And so, so your most recent book that forever transaction we’ll we’ll link to in the show notes and whatnot. but in order to activate, in order to even just build a business, especially a subscription business, you need to start with Promise that you’re going to make to customers. and then, especially again, like you said earlier to justify recurring payments, like, so tell me how you think about a forever promise and how, how any app, any business that wants to set up recurring payments should be thinking about this forever promise.00:25:47 Robbie:Yeah, it’s, it’s really simple. You take a step back and you say, when my customers come to. What is the ongoing problem they’re trying to solve, or what is the ongoing goal they’re trying to achieve and how can I best align my product and my messaging with that goal, that ongoing goal or that ongoing problem.So what can I promise them about it? So with a Netflix, it’s about, you know, entertaining. You know, I’m going to provide you with the biggest selection of professionally created video content delivered in the most efficient way, right. With cost certainty. you’re never going to have to pay extra fees and you know, there’s a lot of, a lot of apps that are around.You know, helping you with some part of your business process, getting a certain kind of work done or tracking your finances or creating beautiful images for, you know, personal use for your hobbies. What have you gaming apps for fun? And I think first getting really clear on what your promise is and who you’re making it to, and then you design the features and benefits to support them.Forever on their journey. And you say, as long as you continue paying me regularly, I am going to continue improving the way I deliver on my promise to you. Right? If I’m a gym, I’m going to have new equipment, I’m going to have new classes. I might offer you stuff online. If I’m news source, I’m going to offer it maybe through an app.Maybe I’m getting the access to the journalists. Maybe I’m getting, get the access to conferences or webinars on top of news because. My promise is I’m going to help you understand the world around you so you can make better decisions. And I don’t have, like, if you even think about that promise, There’s nothing about that promise that makes you say it needs to be a newspaper, right?It could be a conference. It could be classes, it could be a community of like-minded people sharing their learnings and their observations. So why not layer all of that in over time so that you get closer and closer to guaranteeing that they’re going to get the impact that they hoped for on an ongoing basis.00:27:55 Jacob:It’s interesting. in some ways relates to like what a company mission can be for a different audience. Right? You say, you know, revenue has as a mission. And that’s one thing that I won’t change, right. That that’s kind of what we do. And that’s part of joining the company and whatever. But, but I do think there’s value in communicating that as well.This is like the customer facing version of that. Like, what’s our 00:28:15 Robbie:Exactly. 00:28:16 Jacob:Charter. Like, why are we here? And what can I 00:28:18 Robbie:Right, 00:28:19 Jacob:That’s not going to change. Right. It, especially when you think in those terms of not the like person who’s coming to do a very quick transactional thing as in, I’m going to binge you put it, or maybe I just some trying this out, or I have this like one limited life or limited pain, like a limited time pain. Like what’s 00:28:35 Robbie:Yeah. 00:28:36 Jacob:Engagement that we’re going to do, is really interesting ground when I read the, framing of just the forever transaction forever promise. It’s really exciting because we have the infrastructure for the first time in human history to really make this efficient at scale that like computers can do these sort of like, patronage relationships for us.Yeah. And, rethinking how we frame and, and relationships with customers, I think. Yeah. I mean, it’s some of the work are a bit ahead of us on.00:29:05 Robbie:Yeah. Well, I mean, I, you know, I’ve been here a lot. Like I got here first cause I was here for a long time, but you know, it kind of a dubious distinction, but you know, I think you’re right. Like you step back and you say, what are the problems? What’s the ongoing problem. The ongoing problem is I’m constantly running out of laundry detergent.Right? The ongoing problem is I look in my closet and I have nothing to wear for this occasion, whatever this occasion might be. Right. you know, something that I think is really interesting to think about, you know, Amazon. Talks about removing all friction from all buying decisions, right. They started with just books.Right. And you still have to wait two weeks to get the book right when you ordered it, but they had this. All the different friction in all the different buying decisions. We’re just going to, you know, layer by layer. We’re gonna remove all of those things. And, you know, at some point, you know, I think they want to get to the point where I think to myself, those are really cool headphones that Jacob’s wearing.I wish I had those. And before I even say. They’re on my ears. And then I’m like, oh, these are uncomfortable. And they make my hair look bad. They’re gone. Right. That it’s almost magical. That’s what they’re moving to. No friction. I don’t even have to say a word. It just happens. you know, I think having that kind of guidance of like, that’s what we’re trying to do, there’s so many times when I’ve gone shopping and I’ve needed something, whether it’s like buying a new house or buying a white blouse for an event and thinking this shouldn’t be that hard.I have enough money to pay for. I know exactly what I need it for. And I’ve already spent four hours or four months, or in the case of buying a house for years, trying to find, you know, the needle in the haystack. It should not be this. When, when you say it should not be this hard, that’s probably00:30:46 Jacob:An 00:30:46 Robbie:Good, 00:30:47 Jacob:Opportunity. 00:30:48 Robbie:Opportunity.Yeah, 00:30:49 Jacob:No, I I’m. I mean, I’m just sitting here thinking about revenue. Cats are, you know, this is a shameless plug time to talk about my company, but, I think about our forever promise and we, our mission is like we help developers make more money. That’s our goal. but I almost think that. Kind of like a short, pithy way of like phrasing. It really it’s about how do we remove the way he put his barriers? Like, how do we remove all the barriers for a developer to make money? How do we remove all the for a developer to value with software for other people? and often like people see a lot of these.Yeah. Subscription, infrastructure problems, data problems, all these, all these things are not why somebody got into it. Right. When they started Netflix, it wasn’t like, I just can’t wait to do like cohort analysis. 00:31:35 Robbie:Okay. 00:31:35 Jacob:Like all these things, it’s like, no, we want to deliver entertainment to people the easiest way possible.And so, you know, for us, like, In some ways, our particular problem that we’re, we’ve committed and, and going to the forever thing to, you know, our product is, it’s a subscriber, it’s a, it’s a subscription essentially. but it’s a long-term commitment by the nature of it. It’s very infrastructure-related so like I’ve always talked how to, you know, is there something the early days had to give a lot of assurances to folks like yeah.We’re, we’re sticking around like, yeah, this is, 00:32:06 Robbie:Yeah. 00:32:07 Jacob:The long-term goal for us. But I think, I think that comes down to consumers too. Like the best companies I’ve seen. In our space doing consumer software apps, subscription apps essentially have like a really deep connection to the mission. And the problem I think of calm, I think of, 00:32:24 Robbie:Yeah. 00:32:24 Jacob:Photo room, this app, we work with that the, you know, they’ve been in vision, computer vision, and they’ve worked for GoPro and they’ve just, this is in their DNA to 00:32:34 Robbie:00:32:35 Jacob:Of image manipulation.And then, and then on the other spectrum of that, you think of. Companies that are just stamping out, don’t know anybody ever heard that company stamping out utility apps or like whatever it is, and then slapping a subscription thing on it. Yeah, it works. I’m going to get marginally more LTV than they were, you know, before, but 00:32:54 Robbie:Yeah. 00:32:54 Jacob:Not going to, that’s 00:32:55 Robbie:Yeah. 00:32:56 Jacob:The level of like computer or like problem solving for consumers that we were then we were doing before.00:33:02 Robbie:I think you have to be really passionate about the customer needs and the customer’s journey rather than on your product. And this is, this is always a really rough conversation because a lot of businesses, really, really, really hold their products in high regard, whether it’s. Automobiles or, you know, software, I mean, software, you know, most companies around here in Silicon valley, like the software team, they run everything.Like that’s, that’s the talent and everything, you know, they can build what they want. And, you know, I, I used to joke that, you know, when you work with. The car world, right? Sometimes it’s just about the cup holders, right? It’s not about, it’s not about the big engine, right. Which is what a lot of the people, a lot of people go into the world of cars, automotive because they love cool cars, but a lot of people who buy cars.Don’t buy cool cars. They buy practical cars that solve certain problems for them. And you have to be passionate about the problems you’re solving for the customers. That again. So I did a lot of work early on with, in my sort of subscription life in the high-end bicycle industry. I was working with the bicycle product suppliers association, really, really interesting space.But one thing about it is that most people who own bike stores and work in bike stores and sell bikes and manufactured by. Our bike researchers and off-road, you know, risk-taking bike enthusiasts that have nine bikes at home, there’s a whole huge untapped market of people who just need a bike to get to school or a bike to get to work or a bike for, for Saturdays to go to the farmer’s market.And they ask really annoying questions at the bike store. Like, does this come in pink or can I get a basket for this? Or, this going to get em, you know, Reese on my, on my work pants and at some point, even, you know, like there’s always this tension because the people who create the products, sometimes they’re like those aren’t problems I want to work on.Right. Or, you know, I worked in the hospital, you know, kind of in the, in the, in the health industry. And I talked to a lot of surgeons and they’re like, yeah, you guys can do whatever you want around customer, this customer that treating customers like patients, whatever. But I want to see my patient unconscious on a table and I’ll cut them open and I’ll fix them and make them better.And I don’t want to do all that other stuff. Right. it’s hard because they’re the talent. you know, I think this is a big issue with subscriptions because those Mark Key elements, aren’t always the thing that’s going to drive engagement, retention.00:35:30 Jacob:It’s falling in love with your own product, right. It’s falling in love with the 00:35:33 Robbie:Yeah. 00:35:34 Jacob:And not the problem, you know? you 00:35:37 Robbie:Exactly. 00:35:38 Jacob:I mean, I’ve been in the, you know, in the past, when I was in the weeds, like you start to really over it. I think analytics can actually like be, this is where, yeah.Back to the discussion of like, just throw 10 users on the board and maybe don’t like, get the finest. Tooth comb to like go through your data. First is like, when you have like super high fidelity data on everything, you can start to get really data oriented. But if your product is the thing, collecting the data, you sort of inherently bias the data collection you’re doing based on the product you have.You miss a lot of opportunities because you’re not just thinking about the problem space. I worked on this app called elevate, which was training, and I can remember so many. So many like heated discussions about, this flow, should we do this or X and Y and Z. And not as many as we should have had about like, why are people actually coming to this app like addressing those questions from like head-on, and thinking about ways that we can improve the product with that.The beginning. And I haven’t seen that revenue cat too. Like we have a lot of which are really deep and rich and people use and they’re in love with, and we can, you know, you can spend a lot of brain power and a lot of focus thinking about the next iteration of that thing. The re yeah, like you said, the, the, the, the bike shop owner who’s really into bikes are like really into some particular technology touch with.Yeah, these bigger things, it’s like forever promise this, like, what are we actually building? Like what does revenue cap mean? And in a decade when the problems we’re solving now, actually, maybe aren’t that relevant the case. We’ve talked a lot about media companies and I almost snuck in a metaverse joke.And now I will just refer to OMA 00:37:14 Robbie:Yeah. 00:37:15 Jacob:Joke your headphones, but like, Yeah, we think about this as like modes of consumption are going to be changing. that’s where these, like, missions, customer mission or forever promises kind of come in. It’s like making sure that regardless of a Netflix delivered on a DVD or on a streaming set top box, or into some sort of like brain 00:37:34 Robbie:Okay. 00:37:35 Jacob:Like this, the subscribers will transfer.Right. 00:37:38 Robbie:Yeah. 00:37:39 Jacob:Yeah. And this is one of my, like now I’m now I’m ranting, but think is one of the reasons I’m still really excited about all of these pieces coming together, is because it does just feel like we’ve reached some stage in our economy where we can align a lot more incentives this way.Then maybe we have been able to in the past, which I think is just exciting.00:38:00 David:But as we align those incentives and people get more and more subscriptions. Nice little transition there. Thank you, 00:38:07 Jacob:That’s great. David, you’re getting this podcasting thing, like really turning it in.00:38:11 David:There is a growing, chorus of, but subscription fatigue, People are tiring of all these subscriptions and no matter how much you can align incentives And everything else, people are just not going to want to pay subscription. So having, having seen the, the growth in subscription, consumer subscription starting way back at Netflix in the early two thousands, and now we are layering on more and more and more.What what’s your perspective on this, this concept of subscription fatigue, our consumers really tiring of, paying in this way. 00:38:49 Robbie:Yeah. So the upside of, you know, this explosion and subscriptions is that consumers, and actually businesses alike are much more receptive to subscription offerings. They understand them, they understand the value they can provide if they’re done. Right. and they’re easier than ever before for any kind of company.You know, from the smallest mom and pop up to the, you know, the biggest multinationals to offer subscription pricing. The downside is there’s this glut of subscriptions. Every company has them and not all of them are well-designed as, as we’ve been discussing. and that leads to subscription fatigue, and, and there’s sort of three things.Contribute to that. One of them is where these, the product does not justify subscription pricing, right? This is a product I’m going to need once and you’re requiring me to subscribe to it. That feels unfair. you know, or I’m never, I’m hardly ever going to use this in. You’re making me subscribe, even though, you know, my use case doesn’t justify that investment.Second problem is kind of the flip side of that, which I think of the subscription overwhelm or subscription guilt, which is. This great value. Actually, your product is fantastic, but I can’t use all the value because of my own issues. And that makes me feel bad about myself. Like this is when you, you know, you have the new Yorker magazine piling up on your bedside table.Right. And you just cause you just want to Netflix and chill cause you’re tired. But like your thought at the beginning of the day is I’m going to get so smart. I’m going to read all these great. That makes you feel bad about yourself, you can’t, you know what I would suggest for example, that a new Yorker does is to educate consumers, that you only have to read one or two articles to get the full value of your subscription.It’s all you care to consume, not consume all of it or you’re, you’re lazy. but I think that overwhelm, or, you know, same thing with blue apron where the meal kits are in your fridge and you’re not using 00:40:34 Jacob:No, Don’t even fatigue. it’s a rough subject.00:40:39 Robbie:Yeah. Cause you feel bad, like the meals are calling to you and you’re like, don’t go out with your friends. 00:40:44 Jacob:Yeah. 00:40:44 Robbie:In the fridge. Don’t be a waster. 00:40:47 Jacob:With my spouse about cooking because we have the giant meal kit to do. but it’s great. I love the time.00:40:53 Robbie:Yeah. So then, and then, and then I think the last one, I mean, but it’s, it’s great. Cause it’s not the fault. The meal is great. It’s I don’t feel like eating it today or someone invited me over for like the crazy one is when someone invites you to dinner. And so then it’s not even a question of finances.You’re like, well, either way, I’m not going to have to spend any more money and I’m going to get a delicious dinner. Do I want to make the blue apron dinner or go to my friend’s house? Who just invited me? Well, I can’t go to my friend’s house because I feel bad throwing the blue apron in garbage 00:41:19 Jacob:To, the lettuce is going to be wilted by the next by tomorrow.So. 00:41:22 Robbie:Day I can cook. And then the last issue, so there’s there’s know, bad product-market fit. There’s this subscription overwhelmed or subscription guilt. And then the last one is hiding the cancel button. And I’m really interested in what you guys think about that one. Cause a lot of subscriptions, make it really hard for you to get out of this.Cancel anytime relationship, even though. That’s what they pitched. Join and cancel any time. If you can find the cancel button, which we’ve hidden behind 27 clicks with a call us on Tuesday, you know, extra hurdle.00:41:54 Jacob:Yeah, I think it’s, well, my take is it’s terrible. And anybody that does, it should really reevaluate what they’re doing in software. Cause like, I think it violates that trust, right? Like, welcome. We’re going to ask for this thing where you’re gonna you’re you’re gonna let us charge. We’re just going to suck money out of your bank account every month, because you’ve decided to like enter this relationship with us and then we’re going to go ahead and betray that trust.Right. We can turn around and betray that 00:42:16 Robbie:Yeah,Advantage. 00:42:17 Jacob:But, yeah, I hadn’t. Thought of fatigue in so many channels like that are so many aspects, but like the, the overwhelming aspect is interesting. And I resonate. I feel that, like, I feel that with, with dinner boxes, for sure, but even in software too, there’s certain pieces of software.Like, I feel like, ah, I can’t cancel it cause I have these intense and things like that. And that’s not really what you want to, those, aren’t the relationships you want to focus on. Right? Like so. 00:42:40 David:Side there, I think like I use this example a ton, but, Visco, I’m not a daily user. I’m not even necessarily a monthly user, but when there’s a photo of my kids or just a photo, I took that I really cherish. I important into Visco and Fisco makes it better. And that to me is so valuable that I didn’t even care.I mean, 20 bucks a year, I think is too cheap for their product. I would pay a lot more, even though I maybe only use it quarterly sometimes, or maybe once a month or, you know, when I’m on vacation, maybe I use it every day for a week, but it’s interesting that that product. Doesn’t create that sense of, oh, I’m not getting enough value out of it because I get so much value when I do. Yeah, maybe. Yeah. Maybe if it were $60 a year, it would be too much. But I mean, I just, I just would never consider canceling because I it’s just, when I have a photo I care about, I take it to Bisco and it’s better and it like, that’s their forever promise and it just resonates so well with me that I don’t, I don’t get that, guilt you know, I get more than $20 a year of value out of 00:43:49 Jacob:00:43:50 Robbie:Yeah, I think, I mean, it’s interesting. I think one of the things about this, you know, sort of dealing with subscription overwhelm is, you know, is it framed like whatever the customer is, anchoring their pricing to. where they say it’s valuable enough. So, so for example, I worked with, one of these produce box companies, and one of their challenges was that most of their customers said that most weeks they ended up throwing something away.Right. Because it’s never the exact right amount of produce. Right? So you end up at the end of the week with like soggy kale or, you know, turnips, and then you go on vacation and you come back and they put them into with these turnips. But one of the things that we did is we set expectations. That it’s okay to throw out a little bit of produce that you’re still getting a better price than you would at the store.And you’re still supporting farmers, local farmers. So sometimes it’s as simple as just reframing what the expectation is like saying for Visco. You know, if you, if you use, you know, if you use this for two or three, you know, memory pictures a year, You know, doesn’t that pay for itself in 20 bucks worth, you know, three great shots of your life.You know, the three best moments of 2021. a lot of it is about, is about, I think, expectation setting and understanding your customer and what the value is. Like. I don’t know how much I pay for Amazon prime. I don’t care.00:45:05 Jacob:Yeah, 00:45:06 Robbie:I it almost every 00:45:07 Jacob:I 00:45:07 Robbie:Mean, I don’t. 00:45:08 Jacob:A decade ago and haven’t thought about really 00:45:11 Robbie:Right. But I use it every day. Like I don’t care what it costs. I mean, if they start charging $3,000, I would care. But like, if it’s a hundred dollars a year or $85 a year or $115, I don’t care. And that’s a really important point about pricing is that at least I’ve found with many of the subscription companies I’ve worked with and a lot of, you know, software products when they don’t sell well, when their business isn’t growing, they immediately jumped to the. Must be too expensive. We’ll have to lower our price. But in so many cases, it’s not about the price. It’s about the value. I’m not using it. If I’m not using it, it doesn’t matter if it’s a dollar or a hundred dollars. and so thinking about why aren’t they using it before you jump right to, well, I guess I’ll take 10% off the top.00:45:56 David:Yeah, let let’s let’s talk pricing real quick.Cause you, you do have several strategies that you get through in the book and in what you were, what you were just explaining was one of the things I really took away from your book. is it you say in the book that it’s more important to understand product-market fit and willingness to pay than finding the exact right price.And so you, you were, you kind of backed into explaining that, but let, let’s elaborate a little bit. And essentially what you were just describing was that a product that doesn’t have product-market fit, it doesn’t matter what you price it. You know, what are, what are your, what else, what are your thoughts on that?00:46:36 Robbie:Yeah. I, I just think, I mean, in so many things in life, you’re kind of on a continuum. Like, you know, I remember when many years ago I started doing weightlifting and, you know, I told people that I was doing it to be more fit and you know, stronger, and now it’s very common, but at the time a woman doing weightlifting, you know, working out with weights and people would say to me, I don’t want.Huge muscles. And I was like, oh honey, you are so far from that being a problem. Like we’re at the other end of the continuum. Like there are certainly people, women who work out and get too muscly and that’s not what they want men to wear. Like then it intervenes with my ability to do my sport. But for most people it doesn’t just happen.And I think in the world of apps, I think most people. Kind of over index on pricing and think that that’s going to be the key thing to figuring this out. When a lot of times there’s actually a pretty big gap between, you know, kind of where you can make money and where your customer is willing to pay there’s lots of room, lots of different prices. And as long as you launch somewhere in that. You’re going to make some money and over time, there’s lots of ways to become more sophisticated and get to a better and better price point. But a lot of people assume that if they have a highly elastic product, meaning that for every dollar you increase your pricing.Your number of customers drops by a predictable percentage. And I think in many cases for a lot of products that are inelastic, if I use it, I’ll pay anywhere between five and $10 month. And if I don’t use it, I will pay nothing. And so if you notice that people aren’t are canceling and they’re the same people who aren’t using the product, it’s probably not a pricing problem.It’s probably a product problem.00:48:17 Jacob:Right. I mean, if you’re talking about product-market fit and a forever relationship like that, I’m going to pay incident money in terms of my lifetime. Right? Like I’m going to pay 00:48:27 Robbie:Great. Right. And it’s, and the thing is that people assume like, so what I would say is if. If you’re trying to figure out your first price, I’d say, don’t worry about it too much. if you need to do a land, grab like a Spotify priced low and you can raise your price later, although that’s hard, but just do it cause you, you want people to adopt your solution.If you’re worried about, you know, hurting your core business, And so, you know, then start by pricing really high and you can lower it as you have increased confidence and understanding of use case. But there’s a lot of room in there and that’s really, my advice is be somewhere in that range. And if people aren’t buying it or aren’t staying.Look for the other signs of what might be driving it besides pricing, like, is it that they, you know, failure to launch? They never onboarded. They never activated, they never used the best features. is it that they were using it for a while and then their usage trickled off. Maybe they used it up, right?Either they binged or, you know, they’ve watched everything they’ve seen, maybe their job changed. So these features are no longer relevant to their work, but really try to be a detective about where the problem is like. it’s like you have a party, in a bar you’re not making money from the party in the bar. Like before you lower the price at the front door, see like, are people walking by and not recognizing that you have a party, so you have nobody in there because that’s an awareness problem or is it that people come in the front door and can’t find their way to the food and drink and music. And so they think it’s a lame party is that they leave and they never come back.You know, that’s an onboarding problem. Is it that they’ve been eating all the food and dancing to all the music and they’re like, I’m tired of these songs. I’m tired of this food, which is a different kind of product problem, product assortment problem. Or is it, I went downstairs to the food and there was no food and the music, you know, the speakers weren’t working and that’s an operational issue.Right. So fix the problems before you drop the price.00:50:20 David:That’s such...00:50:21 Jacob:I mean I think about it, if you have product-market fit, you’re going to go this way (up and to the right on the curve). All the price is going to do is maybe define that inflection on that curve. Exponential curves, the slope doesn’t matter often all that much in the longterm. You can optimize it eventually, but it’s really getting that product-market fit. Then it just takes care of itself.00:50:52 David:That that is a great bit of advice to wrap up on.Your book, The Forever Transaction, is fantastic. Reading it was so fun just to think about—we put our blinders on with this podcast and in the space we work in with apps—but realizing that so many of the ideas that we think about, so many of the problems we work on, are things that are across the entire industry, across all consumer subscriptions, even a lot of overlapping in B2B SaaS.So, it was just so fun reading your book, and then getting to ask you questions here. I had 30 more questions that I wanted to ask you. I could go another hour or two, but I’ll, put links to your LinkedIn, to your website, to your Twitter in the show notes.Is there anything else you wanted to share with our audience as we wrap up?00:51:42 Robbie:No, I think we covered a lot. If there’s one thing that I want to leave people with, it’s this idea that if you start with the promise you’re making to your customers, helping them with an ongoing problem, or achieving an ongoing goal that’s important to them, and then you optimize your offering around that, your chances of both acquiring and retaining your customers going to go way up.00:52:06 David:Such great advice. Great place to end.You mentioned that there’s some extra goodies listeners can get if they click on the link in the show notes, they can get your book and some extra goodies along with that.So, thank you so much for being on the podcast.00:52:22 Robbie:Yeah. A real pleasure.
  • Sub Club podcast

    How to Thrive Despite Apple’s ATT — Eric Seufert, Mobile Dev Memo

    1:03:43

    On the podcast I talk with Eric about the value destruction of App Tracking Transparency, the limitations of SKAdNetwork, and how to thrive as an app developer in this new paradigm.My guest today is Eric Seufert. Eric has deep operating experience, having worked in growth and strategy roles at consumer tech companies such as Wooga and Rovio, but he also founded and sold a marketing business intelligence company, Agamemnon, and is an active investor in the mobile gaming and ad tech categories. Eric has a depth and breadth of experience with mobile apps and games that few can match. Over the past year Eric has written extensively about App Tracking Transparency and the future of mobile advertising on his trade blog, Mobile Dev Memo.In this episode, you’ll learn: Will Apple’s ATT be a net loss for Apple? Can SKAdNetwork be saved, and does Apple want to save it? Is focusing on organic traffic a flawed strategy? What does the future of app install ads look like? Links & Resources Rovio Snapchat Apple’s Private Relay Tim Cook Outbrain Taboola AllTrails SubClub AllTrails podcast episode Stitcher Eric Seufert’s Links Follow Eric on Twitter Mobile Dev Memo Heracles Freemium Economics: Leveraging Analytics and User Segmentation to Drive Revenue  Eric is on LinkedIn Follow us on Twitter: David Barnard Jacob Eiting RevenueCat Sub Club Episode Transcript00:00:00 David:Hello. I’m your host, David Bernard, and for the first time ever, I’m flying solo today. RevenueCat CEO, Jacob Eiting is busy CEO’ing.My guest today, is Eric Seufert. Having worked in growth and strategy roles at consumer tech companies such as Wooga and Rovio, Eric has a depth and breadth of experience with mobile apps and games that few can match. He also founded and sold marketing business intelligence company Agamemnon, and is an active investor in the mobile gaming and ad tech categories.Over the past year, Eric has written extensively about App Tracking Transparency and the future of mobile advertising on his trade blog, Mobile Dev Memo.On the podcast, I talk with Eric about the value destruction of App Tracking Transparency, the limitations of SKAdNetwork, and how to thrive as an app developer in this new paradigm.Hey Eric, thanks for being on the podcast.00:01:09 Eric:Thank you for having me on the podcast.00:01:11 David:So, we’re going to start off with a bit of a dead horse that’s been beaten over and over again. Apple’s motivation in enacting App Tracking Transparency, but I did want to take kind of a different perspective on it. The most interesting thing to me personally about Apple’s motivation with App Tracking Transparency is what it says about what they are going to do in the future.Did they build SKAdNetwork purposely handicapped, or did they not really understand how handicapped it was? Were they really trying to kill Facebook, or was that a kind of a side benefit? I think that their motivations are important, because it forecasts what changes they may or not make moving forward as they start to see the impact.So, I think the first thing I wanted to ask you is, how do you see Apple’s reaction and how they perceive ATT to be going, now that we’re seeing snap drop 25% after the quarterly earnings report, and see more of the disruption that you and others were predicting, but maybe Apple didn’t quite see coming? How do you think Apple sees this going currently? And what does that say about the future of privacy on iOS?00:02:42 Eric:I think Apple’s primary motivation was not to capture mobile advertising market share. I don’t think that was a primary motivation. I think that’s happened, and I think they expected that to happen, but I don’t think that was the primary driver of this decision.What I think they wanted to do was, there’s kind of like a big picture idea here, and then an immediate consequence idea. I think what Apple did not like, was that they had kind of lost control over content discovery on the iPhone.When the App Store was first launched, that was how you discovered apps. It was through going to the App Store, and some small part search, but then in large part just like the editorial curation that Apple exposes there. That changed over the years, and up until the announcement, or the enactment of of ATT, the way that people discovered apps was through advertising, and primarily Facebook advertising.Apple totally lost control. The content that people interacted with on their phones was not the result of any deliberate decision on Apple’s part or some deliberate consideration. It just happened to be whatever could scale ads the best. Whatever companies could scale their ads the most efficiently, that’s what people interacted with. That’s what became dominant on the platform, and Apple really had no say in that.Short term, narrow aperture view of this, they just wanted to regain control of that. They wanted to be the kingmakers. They wanted to be the tastemakers; the people that decided—the party that decided—what became popular on the iPhone and how the iPhone was used.And I mean, that’s, it’s, if you’ve worked in, in gaming, especially, but if you’ve worked in mobile apps at all and you’ve ever had to go and, you know, go, go through the whole process of pitching your app to Apple, and pleading for featuring You know, that that’s what they want.They, they like to having that control because that allowed them to percolate their new iOS features into the app community through almost horsetrading it’s like, you want featuring, We’d be happy to give you featuring, but you’ve got to integrate X, Y, Z thing into your app.Once you do that, we’re happy to feature you. that, that was sort of the, that was the, the, the negotiating process. You know, that that process, even that process itself became less important and less prominent in the life of a developer over the last few years, In 2012 to 2015 that’s what you did every time you were launching a new app, or even if you’re doing a major update, you flew, you flew to San Francisco, you went to Cupertino, you went into a, conference room at Apple HQ and you pitch somebody.That just stopped being something that people did. Like just people realized that, even if we get featuring, it’s not going to be that meaningful for our business, what we really need to be able to nail what we, what we have to do. Our success is dependent on our ability to scale the product with paid advertising, you know, and explicitly, you know, specifically through, through Facebook.So, I think that was the primary motivation to regain that control right now. I think there’s a bigger picture idea here. There’s a bigger picture motivation or, or like, projection here, which is that, you know, we’re, we’re moving into a paradigm where, you know, the phone you have, the, the device you have that you consume content with is totally unconstrained, in terms of what it accesses, right?Like, and, and how it accesses content. And that’s what that’s, that’s the sort of, that’s the behavioral, norm that, that people are moving into, they just expect their favorite stuff to be available from whatever device they have in their hand, at that moment, as long as it’s connected to the internet, they expect to be able to connect to Disney to Hulu, to Netflix, to Facebook, to anything, they use every day.You get to a point where, you know, if you run this gatekeeping platform, like at the App Store or Google play If, if, if users have leapfrogged that paradigm into no, my favorite content is always available. It’s, you know, sort of like, it’s just, just persistent in the cloud and I should be able to access it however I want at any, at any given point in time.Then you’ve lost control of that sort of, of that gatekeeper positioning. I feel like what Apple wanted to do they, they, know that that’s inevitable. we’ll get there, but they wanted to prolong this dominance and the prominence of the App Store in terms of, you know, the consumer relationship, that’s the first stop you’ve got to go through them to get to the content. because then that also, like that also provides them with some leverage over the, over the developer. And I think w w we’ve I think we’ve probably accelerated. But, but maybe not, maybe this, maybe this, you know, buys two to three more years of, okay, well, I have an iPhone that means I go through the App Store to get content, right.Or I have an Android. Maybe that means I go through Google play to get to content. And not that like, this is it. Matter what device I’m using, I’m using my Samsung TV or my iPhone and my iPad or my Facebook portal or whatever, or my, my, Amazon, echo. I want to get to the content that I have available to me in a persistent way in the cloud.Right. And so I think that was, that was also the primary motivation, or that was part of the primary motivation, but that was like, sort of like the bigger picture consequence of it.00:08:18 David:Right. I mean, where do you put, Apple’s kind of stated motivation of privacy in this hierarchy of, of motivations and, and outcomes because, you know, a lot of people have said, oh, well, Apple was clearly acting anti competitively to favor their own ad business and crush these other ad businesses. It was, you know, primarily driven by the greed to expand their ad revenue.And then I think yours is really interesting as far as like the control, but then of course Apple goes and just in the quarter results recently and has stated over and over again. That it was 100% privacy motivated. do you just not buy that00:08:58 Eric:No, not at all. And I don’t, I don’t necessarily even think at this moment that consumer privacy, has been benefited or protected as a result of this. Right. And we can get into that in a second, but you know, I’ve been publishing a lot about, they’re still allowing fingerprint and they said they wouldn’t, that’s in the policy.Right. It’s explicit. Like there’s no ambiguity there and they’re allowing for it. Right. And they’re not policing. And they could, because they’ve done it in the past. And so I think if you want it to be protective of privacy, That would be one of the things that you would prioritize is, preventing that from happening.00:09:33 David:And you don’t think that? Not that I mean, diving into fingerprinting real quick, do you think that. It’s potentially that they’re just delaying the enforcement to kind of smooth some of the disruption that tra App Tracking Transparency has already caused it because them not enforcing it immediately doesn’t mean they’re not going to enforce it.So, but I find it baffling as well. That they’re not. So do you see them enforcing it sooner do you think that this really is an indication that they don’t actually care about privacy and that this is not ever going to be enforced?00:10:08 Eric:They can enforce it at some point and like they’re there, there wise, like I think kind of a widespread. That in the developer community, that there was going to be a grace period. Right. They would introduce NTT, but they’re going to allow for fingerprinting for some amount of time, because, you know, if, if you just, you know, made this very radical change and it was like absolute from day one, the impact would have been even more severe than, than what we saw.So I, there was a belief that there would be a grace period, but you know, we’re going on like four months now. Right. And, and the thing is, you know, my, my sense was when, as soon as they, because they, you know, they talked about private relay at WWDC this year, I was like, oh, okay. That’s how they do it.Right. Because, and I’ve talked a bunch about how it would be clunky to police fingerprinting through App Store review the store review process. Right. I talked about that in a piece. I just wrote two weeks ago or last week, and it would be clunky, but they could have introduced us in private relay.I thought that that’s what they were going to do. Or at the very least they would roll private relay out. Cause it applies to, you know, safari traffic now. And they would say, look, well, we have to reach parody. Our treatment of the web and or treatment had been app traffic. And so therefore, you know, maybe for whatever technical reason we can’t, we can’t, obfuscate the IP address of in app traffic, it’d be too expensive or it’s a technical challenge that we haven’t solved yet.But like, this is the moment, you know, ad tech when you must stop fingerprinting. And I think if they said that, you know, these ad tech companies would, right, because the way that they’ve sort of implemented this in a lot of these solutions is it’s like an option, right? Like they say, you can turn it off if you want.Right. Cause I think that these ad tech companies are surprised. They thought fingerprinting was going to be. More we’re policed early on, maybe not on day one, but you’d get like two weeks a month. and so they kind of introduced this as like an optional feature. Right. And then, you know, and they, they presented it as like a, Hey, it’s a feature for developers if they want it.And so, you know, it’s, it’s something that they could switch off and they, they they’re ready to switch off. I think. So I think even if, if Apple just sort of like, you know, kind of pantomime those motions, people would stop doing it because, okay. It’s, it’s actually, you know, it’s sort of like actually against policy now versus just before where it was like ignored, but, you know, I, I thought they were gonna introduce in iOS 15 for that reason, or at least again, like, just make the, go through the motions of saying that, that it’s, it’s not allowed, but, but so just, just back Betsy, it wasn’t about like, where does privacy sit in the, in the sort of list of motivations?I think it’s probably so my, my, the heart, the hard time that I have with like, reconciling this idea that like, and you hear this a lot, like Apple cares about policy that people say that privacy, Apple cares about product. How could it have Apples on a person Apple. Apple’s a corporate structure.There’s there’s however many employees at Apple. They don’t all agree on things. Right. Who and Tim cook is not a dictator. He can’t just run the company like that. Apple shareholders, have some control. His board has some control. Right. And so, you know, at least they have influence. And so like, the Apple as a, it can’t have is it doesn’t have a monolithic opinion about stuff.It’s not an entity in its own. Right. I I just don’t buy this idea that a company can care about some abstract concept. Right? Like, here’s another question for you. Apple makes the Apple watch, It’s a health tracker. Does Apple care about your health Do they, are they really concerned? Are they genuinely, you know, invested in your health Or do they want to sell something. so the idea with privacy is okay. It gives us an opportunity to strike a juxtaposition juxtaposition against Android, which you know, has, is, is perceived, I believe, as less privacy-safe but even Android has gone to great lengths or Google has gone to great lengths to bring privacy to the forefront in Android.A lot of it is about informing consumers about their data being accessed, but still there. They’ve done some things. Right. So anyway, I just, I don’t believe that a company, a corporate entity can care about an abstract concept. Right. putting that aside, what does privacy buy them It buys them that juxtaposition, and then it buys them cover, It buys them cover to do all this other stuff. Right. And then to, and then they spin up this big narrative that probably helps us sell iPhones. Because you know what I00:14:07 David:Or future AR glasses 00:14:10 Eric:Exactly 00:14:10 David:Some ways,Positioning themselves, they they care about privacy insofar as it’s an incredible marketing tool for them. it, gives them cover for future devices. They become more and more and more and more private. this thing you wear on your wrist biometric sensors and tracking your sleep and everything else, customers are going to feel more comfortable wearing AR glasses that have cameras on.When it’s Apple branded, than when it’s Facebook branded, there’s been backlash with the Ray-Ban, glasses from Facebook. So, yeah, I get, you I, you know, the Apple fanboy in me wants to believe that, you know, Apple you know, wants to do good in the world, but I’ve, since lost my Apple religion, but I, but I do think to a certain extent that they care about they do care about privacy whether or not any of that’s motivated by Goodwill or otherwise it’s incredible marketing for them.That being the case, you know, and this is where maybe our opinions diverge, or at least how we interpret some of, of what’s been going on. I still am of the opinion, as naive as it may be that that privacy was a primary motivation for them, whether they’re altruistic or marketing or, whatever other reasons they have to be to be positioning themselves this way.I still think that that that was primary and, and that, I don’t know that they even fully understood or expected some of the. the things that have been happening, I think they thought SKAdNetwork was a better solution than it actually is. I don’t know that they expected to see a company like snap that is actually fairly aligned with them, at least, in marketing and public perception as being a more privacy-focused company to see this company that has been reading and talking positively about App Tracking Transparency and see them drop 25% in a single day, because, and then say specifically it’s because SKAdNetwork isn’t delivering.I still think personally. This has more to do with Apple, not understanding and not listening to the industry, which we’ve seen for decades, Apple doesn’t listen, they’re not good at receiving outside feedback on roadmaps, on, on their APIs, on anything else. They think they know what to do.And they think as a product company, they can just build this product bring it to the world. And it’s going to be the best thing since sliced bread SKAdNetwork is just another. Yeah. Another example of them trying that approach and then just falling flat on their face. I think this is important because if that is the case and if they really, if the primary motivation really was privacy, then maybe we do see an SKAdNetwork 3.0, that’s way better than this current one.After they realized they’ve destroyed tens of billions of dollars of value, and also potentially handicapped their own platform because as ad efficiency goes down and as apps struggle to gain traction, they lose too. So, yeah, I mean, I guess just, I’d love to hear your kind of response to that. Cause I know we probably disagree on this a bit.00:17:37 Eric:I guess it doesn’t really matter. Like it, you know, if we, I don’t know, at this point it kind of seems like semantics a little bit. Cause it’s like, well, all they care about privacy because privacy is good marketing messages. But my point is like, I don’t think they genuinely care whether people’s data is being accessed by advertising networks.Right. I don’t think they cared about that to the, to the degree that, it didn’t impact. It was, it was, it was happening sort of unawares, right? Like, or, you know, that these users were like sort of unawares, once it became, like a, like a sort of social rallying cry around, you know, Facebook and, you know, it’s the congressional testimony and you’re listening on our devices.And then once it became something that I think that they could, you know, exploit the insured, then maybe they care about it because it is a differentiator for the products and they can help them sell more products. Right. But, but I think so, first of all, so we are on a scanner 3.0, they released 3.0 3.0 is just like a minor improvement.So 3.0 added view through attribution. And I think it added one more thing. And then also with, I was 15, they allowed the post-bacc to be sent directly to the advertiser, not just the networks. I mean, those are improvements, but I don’t see them continuing to do. S K I know work. I just, I just don’t see that, but I think I do. I do agree. I agree with you that, that they didn’t understand how consequential that this would be to the advertising. I think it’s an example of like the left hand, not talking to the right hand.Apple is like a super secretive organization, not just to the outside world, right. Internally Apple teams are very secretive. Right. And, you know, I, I don’t know that the App Store team was talking to the iTunes team. I, I mean, I don’t even really know how that, how, how this sort of corporate structure separates those two teams.But my sense is that like the App Store team, the people that work with developers, Aware of this, like, and I I’ve been told that I’ve been told that they learned about it at WWDC two years ago. Right. And then they got up, they had to field a bunch of angry emails and phone calls. Right. you know, I think, there, there wasn’t a whole lot of consensus internally around what the impact of this would be.I think the impact was underestimated. And to be honest, I don’t think they would have released something if they knew that it was going to wipe out, you know, just a late, a quarter of snaps market cap in a day. Right. I don’t think they would have released something if they knew it was going to annihilate a fifth of Zynga’s market cap in a day last quarter, you know what I mean?I don’t think they, you know, and what we saw with Facebook was that there’s like this kind of slow erosion of, of, of market cap, you know, from, from like the all time high, a couple months ago. but you know, th the damage hasn’t been just, just in terms of stock price, hasn’t been as, as, as severe to Facebook, as it has to some of these other.You know, who weren’t really doing the things that Apple wanted, you know, to sort of, to mitigate. Right. So I, I don’t think that they fully, you know, first of all, they didn’t, you know, workshop this with advertisers. Like I know that to be true, or, or I believe that to be true, unless some people did it in like, you know, deep secret and they’ve never revealed it, but I don’t think they, I don’t think that’s true because I’ve talked to a lot of people.No one, no one was consulted about this that I’ve spoken with. you know, I don’t think that they really truly grasped how sort of like fundamental performance advertising was, or is to a lot of these businesses, right. In terms of, they’re just, they’re, they’re sort of, you know, operational success.Right. And so I think, because of that sort of differential between. I think what they thought was going to be the result of this and what the actual result was. You know, I, I feel like that does call into question, you know, not only just the wisdom of this, but you know, how well they can defend it, right.When, you know, against maybe some, some, some lines of inquiry, you know, that, that are, that are sort of like, you know, kind of a more powerful and, sort of socially instrumental than, than ours than mine are then, then app advertisers or app developers. Right.I think they’ve, they’ve invited a lot of questions about this through, through, through the severity of the impact that we’ve witnessed over the last couple of weeks and months.00:21:35 David:And that’s where I totally agree with that. And that’s been my perception as well. And I talk to folks as well, is that Apple didn’t fully understand the implications. And if there were people inside Apple who had a better understanding of what might play out, they didn’t have enough of a seat at the table.And that a lot of this was just ivory tower thinking was Apple building ski network thinking, oh, this is going to be a great solution with. Like you said, workshopping it with the people who would actually have to use it. And then, you know, coming up with a better solution. So then, then my question for you is, okay.You know, you were kind of chicken little for a year, the sky is gonna fall. The sky is gonna fall. The sky is gonna fall. I mean, you’ve been really one of the most vocal people about how big these impacts were going to be. And you had a lot of people in the industry saying, oh, it’s not going to be that bad.It’s not going to be that bad. Well, now the sky fell. I mean, you know, a public company having 25% of its market value wiped out in a day due to one specific policy from a platform like the sky is falling, you were right. But then so now Apple sees it. They can’t, they can’t avoid seeing it. What do they do from here?You said, they’re not going to make SKAdNetwork better. You know, are they going to not police, fingerprinting to, continue to soften the blow? Like where does it go? That’s that’s, what’s so interesting to me about okay, whatever their motivation, what they do in the future. In reaction to what’s actually happening now that we’re seeing actual results matters, you know, to, to the tune of hundreds of billions of dollars.And, and one of the things I put in the notes to talk about is a lot of this value that’s being destroyed is not accruing to Apple. It’s not as if you know, a hundred billion dollars of market cap wiped out of Facebook and Google and snap and other folks, it’s not like Apple is actually capturing that because they don’t, they don’t have the ad inventory.They don’t they’re, they’re not a big player in the space. So, yeah. W where does Apple go from here if they painted themselves in a corner,00:23:38 Eric:Maybe, I mean, I think what I would, you know, if I was an Apple, I’d be worried about, you know, they’ve got a lot of theirs are, they’re already under a lot of scrutiny, right. Like, you know,00:23:47 David:Right.00:23:48 Eric:What did the DOJ, what just three days ago, decided to re reopen the investigation in that, in the Apple, related to, to the way they operate the App Store.I just think it’s really tough to, to maintain this line on one front while, you know, you’re obviously having to lose ground on, on another front. Right. because as we’ve seen, like there’s just been this steady trickle of them, you know, seeding ground developers or, giving up a lot of, you know, Exclusivity and, and, you know, PR preferential treatment they have with, with apps or operation, right.Like, it just feels like maybe it’s maybe it’s they felt like, well, that will, it we’ll expand one area of that, that preferential treatment while we’re sort of like forced to abandon other, areas of preferential treatment. But I don’t know that they were, I don’t, but that would only make sense if they actually really understood how dramatic the consequences of, of ADT would be, which I don’t think they did.You know, I don’t know. Maybe they have painted themselves into a corner. I mean, I don’t know. So that’s the thing about asking, I know work is like the way it was designed. It’s got a lot of features that on their own would be smart, you know, tech, progressive privacy, protective, you know, mechanisms.Right. But in combination just renders this thing, like totally. Dysfunctional. And that’s the problem because now if they go back and they get rid of any of these given features, so like, or not features, but restrictions, right. So let’s say they say, okay, so first of all, I mean, and I’m assuming most people listening are at least familiar with this.I don’t want to, I won’t, I won’t go into the whole thing, you know, description of Muscat network from zero, but let’s say they give up on the privacy threshold, which would be weird because there’s a privacy threshold for Apple search ads to be fair, but let’s say they gave that up. Right. then, then, okay.You move a little bit towards, you know, something that, that is functional and helpful. but you’re, you’ve, you’ve, you’ve made a pretty, sort of like very kind of public facing kind of Mia culpa decision, which I don’t, you know, or announcement. Right.Which I don’t know, that is an Apple’s DNA to do that kind of thing.00:25:49 David:And giving up the privacy threshold would actually allow tracking, which is what they’re saying, they’re trying to prevent. So that’s the other problem with giving much ground on some of these things with SKAdNetwork.00:26:01 Eric:Well, it could, it00:26:03 David:And that that’s kind of the broader question is like, can S K I network even be saved and, you know, let’s say regulators did come in and say, this was completely anti-competitive what’s the solution.I mean, if you roll back and give unique identifiers to every app, you’re going to have all the same unintended consequences that came with the IDFA. yeah, I mean, that’s like four questions rolled into a statement, but, can I ask that network actually be saved while maintaining some level of privacy?00:26:32 Eric:Maybe, but I don’t know that you do give up. So I don’t, I don’t think you totally Naval tracking. If you’d give up the privacy threshold, what you’d enable would be the advertiser would be able to link the specific campaign to an individual user in their data environment. Now, if they chose to share that with a third party, Platform or as platform, I guess that that would be their decision, I don’t think by default it would sort of instantly, you know, make that trackable. Right. Cause all you’re really doing is adding a little bit more context every post-bacc versus just some, because you already get, I mean, if you get rid of the privacy rest, it, that just means those NOLs go away.Right. And so you’re able to get a little, you’re able to track, you’re able to sort of observe the less frequent, transactions. Right. Or just tell me what it is. If you tell me what it is that I can design around that. Right. But we don’t even know if it’s dynamic they’ve, they’ve apparently changed it like without telling anybody.And so all of a sudden the number of Knoll conversion values exploded. Right? I mean, that’s the thing, just make it public because if you do that, then I’m going to say, you know what? Okay, I’m going to design my app, such that like. The people I care about are going to trigger this or not. Right. It’s not something that’s in its early funnel.It’s something that it’ll happen. You know, I can build my, I can, I can sort of like Intuit, you know, just through like kind of statistical modeling, what, where I need to place this in order for it to trigger the number of people that satisfies the privacy threshold, such that I get the data that I really need to make decisions.Cause right now you have no idea. And you know, I have no idea where to place that. What, what is that? Unless you just experiment a bunch of times, but, but even then it’s, it’s the, the broader environments to variable because the, the campaign could go up and down in terms of like DAU or DNA every day, you know what I mean?And then if they change it, then there’s like a totally unknown exhaustion is variable there. Right? So it’s impossible to tune your app such that you, you say, okay, look, I get it. You’re not going to let me have. conversion value if fewer than 25 people did it. Well, I know how much traffic I’m driving through all these campaigns every day.So, so I need to consolidate my campaign, such that each one drives 400 in new, new installs every day, because I know that, you know, an eighth of the installs will trigger that thing, but those will be the users that really care about. Right. And if you did that, then at least I know, and I can design everything around that, but I don’t even know.I don’t even know if that changes over time relative to the number of installs I’m driving. I don’t know if you’re changing it on the back end without telling me like, it’s just, you can’t operate in with that kind of opacity. It’s just, it’s just not functional. And then you’ve got the a hundred campaign ID limit, you know, you’ve got no creative, parameters in the post-bacc like, you just can’t do anything with this.00:29:04 David:Yeah. I mean, that’s where it does seem like this was designed as an academic exercise. How do we prevent any. Identification of any individual ever from being even remotely possible. And, and it was an academic exercise that they played out. Whereas if they had workshops with the people who actually have to use it and had, thought through the kind of business use cases and you made a valid point earlier, you don’t automatically, enable tracking by, reducing the privacy threshold.But I think, you know, Apple She kind of rethink some of the priorities around this so that you get better business metrics, even if one or two people can slip through the cracks of being able to be uniquely identified. And I think the argument there is like, it doesn’t matter at scale, like if one person slips through the cracks, Facebook is not going to build technology around finding that person here and there that slips through the cracks because it doesn’t matter to their business to find one or two.It matters too to have more data on everyone. So the campaign ID limit the creative ID, like all of these seem very ivory tower thinking that just is not going to play out in the real world. So, a few minutes ago you were saying you don’t think Apple will improve SKAdNetwork, but now we’re talking about how they could.Where does the rubber meet the road what’s going to happen?00:30:31 Eric:I mean, I don’t. Cause I mean, the thing is like, you know, we’re just kind of riffing right now. Right? I think like if we sat, we sat down with the chocolate or the whiteboard or something, you know, because we, I wrote an article a couple months back, right. It was, it was like right after this was announced and I kind of like, here’s some suggestions here’s, here’s what you can do to make STI work.More helpful and you know, some really smart people in the Mobile Dev Memo, slack pointed out holes in my analysis. They know if you do this, I, I, if we, if we had enough, post-tax going, I could sort of encode the idea of V over enough of the post-tax like, event in a post-tax. I could put like one character from the 90 fee and every single one, I could get the users.So it’s, that’s why you can only have one post-bac per install, right. Because if you did 50 or so, that makes sense. So, I mean, the thing is like, if I’m just ripping, what I do believe though, is like, you can eat, you can either have the privacy threshold or the random. Right because I need so like ramp the privacy threshold up to a million.I don’t care, but let me have real-time install accounting because without that, I can’t do anything. Right. If you, if I, if you’re off you skating, even the date of installed in that I can’t, I can’t do in Sauk county. I can’t, I can’t, I can’t, assess the economics of my campaigns because I don’t even know when the installs are produced and I can’t make changes to campaigns.Right. Without having to shut the whole thing down and wait, and to reuse that, one precious campaign ID within the, within the sort of like constraint of a hundred. Right. So. my sense is that like, if you just solve for that allow that allow real-time install accounting and then do whatever after that you have to do to prevent me from figuring out who those people are.Okay, that’s fine. But at least then I know this campaign drove this many installs today. These were the targeting parameters. This was the audience I was reaching. This is how much I spent. Right. And like, even if we just went, cause I don’t think you would lose a lot if you just went back. Cause right.You know, the, the frontier that we reached was like, we’re in, especially on Facebook, I’m optimizing for value. I’m not demising for ROAS. Right. And that was like the sort of the final form of, of, of mobile advertising measurement is like, I’m telling Facebook, give me 110% ROAS on day seven. If you do that, I don’t care how you target, who you target.You know, w how much you see CPI is, is irrelevant. I’ve got unlimited. You know, from a, from a sort of like practical standpoint on any given day spend as much as you can, but just make sure we’ll get a hundred times that was the final form. And I think even if we sort of like retreated from there back to just like CPI, the average LTV of this campaign is X and the average, you know, the CPI was Y and so therefore I’m making money.That would be much less efficient, but still like it’s workable right now. What we have is not workable.00:33:10 David:Yeah, well, I think you and I could riff on all this wonky stuff for another couple of hours and, I hope Apple’s listening and actually going to make some changes and, listen better now that they’re starting to see some of this stuff, but I did, I did want to change gears and kind of start talking through.What this means for developers and specifically, you know, sub club podcasts, what it means for subscription app developers and, and what you were just talking about. I think, I think is actually a really important, topic that not a lot of people fully understand you’ve written about it in the past, but I think it’s still somewhat abstract enough, that I wanted to, to kind of have you describe it in more concrete terms.And that’s the fact that with these, you know, day seven ROAS campaigns and value optimization and event optimization campaigns, Facebook with all of its data and AI in incredible targeting efficiency has kind of, in some ways been doing the job of developers. It’s been finding. Those unique profiles, user profiles of who’s actually going to spend money.Who’s actually going to enjoy the app. And, and it’s like, in some ways they, they became this really efficient black box of user profiling and understanding users that developers had kind of in the past done. And then maybe now need to get good at again in the future. know, again, you’ve written about this before, but just describe that process, maybe a little better of, of how amazing Facebook really was at finding the best users for an app.00:34:51 Eric:Well, they were very, you know, as you said, very, very good at it. Right. So, you know, it was based on like an approach that is, was very, simplistic, right? I mean, I just gonna, I’m gonna, if I can observe everything, then I know everything about this user and I can just target most relevant ads to them.Cause I know everything about what they interact with. Right. And I know what they like and you know, it gets to a point where that, that that ability to observe is so pervasive. That I, I do agree like that, that had, gone too far. Like the pendulum has swung too far in that direction.Like it is not, I find it unsavory to think that like, literally everything I do on my phone is observed and instrumented and ingested as a data point by one company. Right. Like that’s, I’m uncomfortable with that. So, you know, and, but, but like, I think, you know, to your point, like going, you know, if you go back to when, when UAC was introduced, right.So Google their mobile product UAC is that’s they describe it. I think that they themselves describe it as a black box as like a selling point. Right. Because it’s like, look. Worried about any of that, you will handle all of this difficult analysis for you. We’ll find the best users for you. You don’t have to iterate across audience, definitions, or even creative, you know, and do all that experimentation yourself.We’ll do that on your behalf with our superior tools. And when they announced it, there was a lot of, you know, disquietude in the, in the developer community. Cause people are like, look, we built this. We want to do it. I don’t trust you to do it. I trust you to do it well, but I also trust it to do it to your advantage.Right, right. To pursue your best interest. Not necessarily mine, what I think you’ll do. So this is, and this is exactly what these platforms do is they sort of, they take whatever boundary you set or whatever standard you set around efficiency. And they, they reached that. Right. They’ll they’ll get you to exactly what you say is like the sort of quality threshold or the efficiency threshold for your campaigns to keep spending money, but they won’t give you any more than that.Right. So they could blow out your campaigns and get you 400% real ass. but if you told them you only need 110 by day seven, that’s what, that’s what you’re going to get. And if they get you to that 400, then they’re going to buy you a bunch of crappy traffic that brings the sort of average down until it hits that one 10.Right. And so, you know, that’s, that’s the power that they had, which, you know, to be fair, it’s like, they were really good at that. And they would probably be, and, and, and them being really good at it. And then, and then present and providing that as a product productizing that and making that available to everyone.Meant that anyone could spin up a Facebook campaign, you know, any, any Shopify retailer, any Shopify merchant, any small time app developer and spend money and grow their product, grow their audience, right. Versus go back to 2012 and like, you know, the best UAA teams won. And, and a lot of times these were like big teams, big companies that raised a lot of money.You know, now, you know, it is way more egalitarian to open it up to anybody. And, you know, the small shop owner, in, I don’t know, the middle of Kentucky or whatever could, could have access to this world-class machine learning infrastructure to grow their business. Right. And then they only really had to compete on the quality of their product and not the quality of their user acquisition infrastructure.So in a way it was, I mean, it was a giant gift to these SMBs and, and if the proof is in the pudding, look at Facebook’s advertiser mix, 10 million advertisers, vast majority SMBs, right? 10 million average. Right. Think about any company that has 10 million customers, that’s just an absurd scale. Right?And these are people spending, you know, in aggregate tons of money on Facebook. So like, it made sense, but, but, you know, there was a lot of pushback when UAC announced that. Cause developers said, look, we, that was our competitive advantage. Like, well, should it be, if we go back to basics and everybody has access to the same quality of infrastructure and the same quality of like, sort of like, you know, marketing tools and then you can be on the basis of your product.00:38:49 David:So then are we kind of going back to that world? I mean, after I think transparency is going to degrade, Facebook’s targeting efficiency because they’re not going to have that pervasive tracking where they know everything that’s going on on your smartphone. So, so where do we go from, from here as far as, you know, what developers need to be thinking about?And, and I forget exactly when you were at this post, but, but I really appreciated you. You kind of talked through some, some tactics even around. developers needing to get better at capturing intent about potentially kind of bifurcating experience in the app is that we’re we’re developers should be headed of, okay.Now Facebook can’t bring me the perfect user for my app as it exists today. and instead developers need to get back to the basics of understanding their user base and kind of building out those user profiles and understanding who they should be going after. Is it, is that where we’re headed?00:39:48 Eric:I think so. I mean, I think we talked about this last time I was on this podcast, but like, you know, so when I wrote my book, Freeman, economics, I mean, this was like 2013. Right. And so this AEO didn’t exist yet. You know, VO was didn’t exist yet. This was, you bought installed. Right. And the idea of freemium or my sort of thesis with freemium is that like, it gives you the ultimate power to personalize.And so you need some minimum scale because you need a minimum amount of people to experiment with in order to make, you know, some small percentage of people that do monetize meaningful to you. but in order to do that, you need like a sort of like very large surface area for experimentation, right?You need a lot of content to be able to test against people and make sure that, you expose to them the exact perfect thing that they want. And in order to do that, you eat a lot. And so what ended up happening was that idea of flip. And it, and it became less about doing that in the product and more about doing that with the creative, right.And allowing Facebook to do that with four year on your behalf with the creative, then they found the perfect user and you need to do any personalization in the app because they probably the perfect user just make the app for the perfect user, that individual profile, that one profile. Perfect. You make that app, Facebook will find those people through like mass, you know, wide-scale experimentation with creative.Well, now it’s flipped again. And so, you know, when someone comes into your app, you don’t know who they are. You don’t know how qualified they are, because the targeting has been degraded to the, to the point where, you know, th th there’s, there’s not a whole lot of, of sort of like operatory, you know, relevancy that you can Intuit there.And so you’ve got to parse that out from their behavior, show them something, see how they react to it. If they react positively to it, show them more of that. And if they don’t show them more. And, and that kind of personalization though. I mean, it was very powerful and I talked and that’s, I wrote a whole book about it, but it’s hard to do.You need a big team, you need data infrastructure, you need that’s, that’s the thing. And then you revert back to like, well, only big developers can do this. Right. And so you’ve kind of just edged out the small guy. you know, the developers that are just like a couple of people and they got to just whiff, or they, they got to take a flyer on some idea, and they better hope that it works right.Versus being able to kind of iterate into that and provide one app that gives like personalized experiences to sort of everybody that comes through.00:41:56 David:Yeah. So then those, I mean, what would your advice be today knowing that you can’t just, you know, throw a hundred grand at Facebook and let them figure out your perfect user? How, you know, if you’re, if you’re building an app today from scratch, or let’s say you’re at 20 or $30,000 in MRR and you want to make that leap and really grow, what do you do?00:42:18 Eric:Well, I think so. I mean, in that post, I mean the one thing that is, you know, it’s a worthwhile exercise, but it is trying to instrument these, these signals with the conversion values for SKAdNetwork. Now, the problem with that was, you know, going into this before NTT was launched and, you know, I worked, you know, I worked with some companies to do this and it’s like a data science exercise, right?You just, you, you run these, you know, you go back and you have like, kind of look back models and you find out what the commonality was amongst people that ended up being good users. And you try to surface that in the app and you encode that as a signal for a scanner. The problem is going into that exercise.You’re thinking that sci network was like a good faith solution. it made sense, but now we realize, well, we don’t even know when they’re going to te when they’re going to, how many of these we need to trigger before they even start reporting them to us. Right. And so like, it’s like, okay, well, that’s not really an option.You know, I think the other thing is, you know, you approach this as more of like a product marketing, you know, project and just trying to figure out who your audience is right here. And that’s like, going back to basics, that’s saying, okay, like, what are the demo features of the groups that like this type of product and that’s what I have to target against.Right. And then just, and then trying to get, you know, cause you can’t do mass creative testing anymore, at least on an iOS. And so, you know, trying to work out some pipeline of like, we try concepts on Android where we can still do kind of mass testing and then we promote the, the conceptual winners to iOS, but then we’ve got, you know, fewer, various success there.So we’ve got to kind of adapt that for the iOS environment. Like it’s just, you lose a lot of, there’s very lossy that each time you, you sort of transfer some sort of component of understanding from a totally separate platform. To iOS and then from iOS to like different environments to, to other environments on iOS, you just, you lose signal there, you lose precision.So I mean, it’s it’s, but that’s it right. And then, you know, trying to get away. So I think another thing is that, you know, you talk to some of these companies and Facebook had become like kind of a drug for them. I mean, it’s just like they were addicted to it. and it was just so easy to only use Facebook, right?Because you could accomplish everything you want it to, but you know, that’s a classic, you know, sort of, that, that that’s a classic sort of blunder from, from just a commercial perspective. You never want to be totally dependent on another platform. You know, now Facebook didn’t make this decision.Apple did, but, you know, nonetheless, you know, your sort of devastated by it, right. Because of that dependency. So I think the other piece of this is just trying to, is doing, doing the work you should’ve done a long time ago, which is diversify your traffic mix. Right. And that’s actually kind of difficult because Facebook, again, they did all that creative exploration for you.You know, they have such a broad user base that you could find all these different groups in scale, right at to, to scale like these even niche audiences, niche, look, any, any sort of like niche for X strategy game. You find enough people to build out, a big da you base and that’s not true.I don’t the other platforms. Right. And you got to really nail the form factor for those like snap is totally different. Like the way to approach the app is totally different. The Facebook, the way to approach tick talks to even snap, right? The way to approach Outbrain, Taboola totally different than any of those.You know, the way to approach YouTube is even different. Like every, all these, these are very, you know, particular, unique, channels and, and, and the way that the ads are are exposed in the products is different across them. And so you’ve to, you’ve got, gotta go through the work and the investment it’s, you’re investing in a data and, and, and sort of institutional knowledge.And all was never went through that exercise because it’s like, I can just00:45:46 David:Right.00:45:46 Eric:Spend more Facebook.00:45:47 David:Yeah. And, where do you think organics fall into this mix? I know, like we talked to all trails on the, on the episode before that I said, not only are they a unicorn app, likely evaluation, but in, in their success with organics, I mean, there are apps that just find incredible success with that, right.Kind of search optimization or finding that right niche that really drives organic installs. Where do you think the average app should be placing organic and how much focus should they be putting on trying to get some of this free attention and build, you know, user generated content and links and things like that.00:46:35 Eric:I mean, do it to the extent that you can. I mean, why not? you know, I, I don’t think you’ve got to choose one of the other, right. I mean, you should be ideally maximizing the effect of both of these strategies, but I will say one thing it’s that you always have to turn on paid UI, right. You’ve always got to turn on paid marketing.There’s varying, you know, sort of, timelines, you know, over which you have to confront that reality, but it is reality. You’ve always got to turn it on and like, I’ve done enough, like advisory for like private equity funds and just big companies that are looking to buy other companies.And it’s always, the reason they bring me on is because I’m going to say, we could triple this business. If you did paid UA, right. We could cut Drupal this, like how, how, how much, how much bigger could this get? Right. And you know what I mean? Like, there’s always a point where they’ve capped out. They never developed this, you know, expertise.Internally, right. It never became like domain knowledge that they possessed. And for that reason, there been a lot of false starts. Cause it’s like, well, we can always sort of lean back on organic and it’s going to take time to spin up paid and they bring someone in. And within two months they haven’t really materially improve the business and they spend a bunch of money.So they get fired or, you know, they get the budget cut and they quit. And then they do that three more times and then they realize we’re stalled out in growth. and no one wants to come work to be our CMO because like, it’s pretty obvious that they’re not gonna be. You know, the full freedom and the only way to sort of like break out of that cycle is to have the company get acquired right by a private equity fund is going to say, yeah, we’re going to bring in a CMO and you know, these management’s kind of gone and, or they’re gone, but, or they can stay with it to play ball with the new, you know, the new execs and, and we’re just gonna spin up paid marketing and that’s, and that’s how we grow this asset and that’s how we make our money.So I’ve just been on enough of those deals where you always turn on page away. If you, even, if you, even, if you think you never will, it happens, you know, outside of your, approval.00:48:28 David:Yeah. I didn’t mean to phrase the question anyway, that made it a black or white that you had to choose one over the other. And actually I was, I was trying to, to, to kind of, throw a softball at you, because I think your, your thinking on this, is great in that the sooner you do spin up some level of paid marketing, the sooner you, you can understand the different audiences that are going to be coming into the app.And, and that’s something that you’ve talked a lot about that I think is really fascinating. Yeah. If you can find a good organic channel, go for it and bring traffic in, but know that when you spin up ads, those that traffic is going to look different. They’re going to convert different. They’re going to be interested in different things.And if you, yeah, I’m stealing your, your kind of playbook here. So yeah. Tell me why you think. even if you do have a very successful organic channel and maybe that’s the strategy, you kind of get from 10 K a month to a hundred, 300 K a month. But to get from there to the millions a month, you’re going to have to spin it up.So what’s the playbook for, for kind of building that expertise in house. And when do you start, when do you have to start ramping it up?00:49:43 Eric:So thank you for reminding me of my thoughts here. so, so the idea, the idea there is like, organic’s never going to be the ultimate scale channel, right? Like it’s gonna, it’s gonna, it’s, it’s gonna, you’re gonna reach some sort of asymptote with growth there and it’s gonna flatten out and probably at, you know, if you kind of close your eyes and you pictured your app at like the sort of greatest potential, right?Th this sort of like greatest sort of like intrinsic potential paid is 80% of daily, you know, new users, right. Or 60 or whatever, but it’s a majority. And so if you’ve only. You know, grown via, you know, just sort of like organic traction and organic like magnetism, and you’ve, you’ve gone through like many sort of cycles of app or product iteration to sort of optimize the product for that group of people that do look distinct that will look distinct from people that have responded to some kind of stimulus, right.And have some sort of intent, sort of like, you know, driving their, their adoption of your product, then you’ve optimized for the group. That’s that at the greatest potential scale of your, of your product is in minority. Right. And what you really want to do is you want to optimize the product for the majority, the, where all the growth, where the growth can be, right.And so that, you know, if you delay layering in pay traffic and you, and you delay, then you delay understanding what they want out of your product. And the sooner you bring that in the sooner you can sort of, Optimize the product for them, the more efficient your pay traction will be, and you’ll get an organic halo effect from that.Right. And so like, it’s like, well, the sooner that you do that, the faster that you sort of reach that, that sort of, you reached that potential on the organic side. So it’s more about like, are you thinking about like how, I mean, an exercise that I always love to do is it’s just like pause and think about like, what would success look like?And for most apps, success looks like, yeah, we’re spending a ton of money on paid you way. And there’s a lot of organic too, because that’s just a function of being a successful app that a lot of people know about, but, but we’re spending a ton on UI. That’s a good thing. That’s not a bad thing. It’s a great thing.And so, but, but the majority of our users came in through paid UA and so we’ve optimized the app for them. and so we’ve, we’ve, we’ve made the economics better over time. And then the other piece is like in a, talked about this a lot too. It’s like, you’ve got to change it. Over the life cycle of your app.It, because you know, a lot of times what you see as, you know, you see an app that’s new they’ve got like explosive growth, right? And you look at the, just like a kind of stacked, a bar chart of the cohorts by age. And it’s like, well, on any given day, the vast majority of users are new or they’re less than a month old.Right. And then like you go, you fast forward two years or three years, and a really good app, that’ll be flipped because you’ve, you’ve retained people. The vast majority of people that use your product every day are old. I mean, in terms of like when they adopted your product, because it’s sticky because it’s retentive, right.And that’s a, that’s a great place to be. But that, that you’ve got to change the way that you think about product optimization at that point. Like when you’re going through the product iteration process, like, well, you’re not optimizing for the newbies anymore because there’s way fewer than you got to keep the old timers involved and engaged and.Right. Cause, you know, that’s just where the vast majority of your revenue is coming from. Right. And, and, you know, and, and at that point you’ve probably reached, you know, some proportion of your Tam. And so you might not even be doing new user acquisition as such anymore. You might be doing a lot of retargeting re-engagement.And so it’s just like, you gotta be very conscious of like the life cycle of the app, what the, what the user base looks like in terms of composition by age and like all that kind of stuff. And it just, it just takes a lot of consideration and it’s it’s, you know, and if you get to any point where like any of those, any of those distributions is skewed to an extreme, to an extreme one direction or the other, you probably got a problem.Like if you’re all organic, you’re not you leaving money on the table. If you’re all old timers, when you’re not growing anymore, if you’re all 00:53:39 David:Right, 00:53:39 Eric:Retaining enough. Right. It’s like all these different levers that you got to pull to make sure that you hit the optimal sort of combination.00:53:45 David:Yeah. That’s great stuff. I love the way you put that too. I think there is some level of magical thinking that if I have just the right app, I never have to do marketing, marketing is a dirty word. Spending money on marketing is. It is wasteful or only companies with bad products have to do marketing and that’s just not true.What’s especially funny. a lot of these folks or indie developers who hold up Apple to be the end, all be-all Apple spends tens of billions of dollars on marketing, Apple measures that marketing while at the same time, you know, enacting ATT. App Tracking Transparency So it is funny that dichotomy of, and the magical thinking of I shouldn’t have to pay for users.My product should be good enough it, really is just magical thinking. ultimately, spending money on marketing is a good thing. Not a bad thing. I love that perspective.00:54:39 Eric:Yeah, my, we had a Halloween party for my son and his classmates he’s, he’s very young and he was, he like, he did this thing where, you know, he wanted to be two things for Halloween. So they had like a, you know, a parade of their school. And then, we had, you know, we just had Halloween day country competing and stuff anyway, so he wanted to be a dinosaur.And then he decided he wanted to be a vampire for the Halloween day. so we had to get him a second costume. He was a vampire and a, and we’re having this party and someone was like, oh, you look like such a scary vampire. I was like, I work in digital advertising.I’ll show you what a vampire. looks like, It’s this idea about digital advertising. Oh man. It’s, so disgusting. it’s crass gross. You have to spend money to acquire users That’s that’s that’s that’s so, vulgar, but in reality, you’re leaving money on the table.If you could be doing it and you’re not00:55:35 David:Right. 00:55:36 Eric:That’s not good. 00:55:37 David:Yeah, totally. So, so, that, that’s actually a great place to wrap up. Like where, where do we go from here? So ATT App Tracking Transparency is what it is. We don’t know what Apple’s going to do. We hope they make things better, but, what is the future of, of app install ads? What is the future of, of marketing your app successfully?00:55:57 Eric:It’s funny because I, have been the biggest, crypto skeptic since day one. I remember people were telling me about Bitcoin in 2011 and I was like, this is a joke. Like, this is a, there’s no need for this. There’s no use case for this. I still feel that way, but it’s gotten to a point where I feel like it’s actually inculcating new behaviors where this is just.Crypto in general is probably the thing that introduces us to these ideas. it’s like an imperfect way to implement them, but it makes us think about them. then there’s going to be a solution that follows The structure of crypto. that is, is actually the better way to, to, to implement these ideas.But I’ve worked with a number of web 3.0 gaming companies. Right. And, and their challenge is that they can’t be on the App Store. they’re running like web properties. how do you promote that? And, the thing is if you’re running it on the web, you can access it from your mobile device.I can access these games from my device It’s just not on the App Store. if you get one of these that blows up, you get the halo of web 3.0 games. You get the, hit game that, creates the space for this category to thrive.Then. Maybe it just becomes, you know, acknowledged that yeah, we can go through the App Store if we want specific types of games, but if we want these other types of games, we just go straight to the browser. my big question is why did Apple do privacy really in the first place? maybe it was to actually route everything through the App Store, That would be the cynical conspiratorial take. It’s that they want to prevent your access to the open web or they want to gatekeep it. so they’re going to decide what you’re able to access. But anyway, There are a lot of web 3.0 companies thinking about this right now.They can’t go to the App Store, So there’s no app install ads for them. It’s all web-based. and, and also, you know, they’ve done a great loves Web 3.0 companies have done a great job of fostering community-driven marketing, Getting a discord server with 20,000 or 100,000 people in it.And That’s where you advertise. you never have to pay for anything. now that’s a first-mover thing. And I think that declines as more people enter the space. There are just, you know, there’s just too many of these, these sort of games to, to sort of rely on that.But a lot of companies are thinking about that right now. How do we drive people to the web to do acquisition? Right. A lot of, you know, as, you know, a lot of, subscription companies, have been doing that for a long time, There are well-worn strategies for doing this. And they’ve been monetizing that way for a long time too.They haven’t been screaming about it. But they’ve been doing it. now that, well, okay, now that’s probably, that’s, that’s a policy that’s allowed to, you’re allowed to do that. Apple blesses. Well, they don’t, they, anyway, they say we can’t stop you. Maybe the consequence of this whole thing is that it just moves people into the browser. there’s the web 3.0 piece of it, which, who knows maybe that is a dud. Maybe it’s a gigantic category. I’m not convinced either way yet, but you’ve got people that are saying I’m going to set up web shops I made the point that like, look, I don’t think that, you know, there’s, there’s, there are systematic reasons why that probably doesn’t become a mass-scale solution.A lot of people are doing that anyway. A lot of games are doing that anyway. That’s the other dirty little. secret A lot of gaming companies were sending emails saying, Hey, you know what, don’t buy these IAPs in the app. Because if you go to our website, it’s 20% off they’re already doing it.They already had a web shop set up and, you know, but, but anyway, I think maybe a consequence of this is we move in that direction. Now, maybe Apple then clamps down harder. And they say no privacy-related we’re blocking that. maybe they do that for web 3.0 Maybe they do that for whatever to protect people, who knows.But there’s that idea. let’s just move people to the web. We’ve got more control there. It’s just, it’s just a better storefront, right? Like I talked about that on the, on, on the stretcher podcast, it’s a better storefront. It’s you’re you have way more opportunity to do cool things there, personalization, like real-time optimization and things you just can’t do with the App Store.Because it’s, limited in the number of sq use and then, but then maybe the other thing is like, well, we just, we fundamentally shift the way we think about measurement. It’s all about incrementality It’s all about media mix models. It’s all about statistical probabilistic thinking.And that’s probably a good thing too, because like, you know, that’s, you can make that work.01:00:11 David:At scale, That just still leaves the smaller folksStruggling to get to scale.01:00:16 Eric:Right it does but you can make that work at scale and there are no privacy concerns, 01:00:21 David:Yeah, that’s interesting. I didn’t know where you’re going with the whole web 3.0 thing, but I think you landed that well. I think you’re right there, it does feel like with Apple the tighter you hold onto something, the more it struggles to get free. The more Apple continues clamping down on the App Store, the more they’re pushing developers to think outside of the App Store.We’ve seen a lot of our RevenueCat customers build-out web onboarding, and experiment with more and more stuff on the web because of this. So, yeah, I think that’s really interesting. Then seeing what the Facebooks of the world can do with this new paradigm, they can still collect a lot of first-party data. Some of their signaling is gone, but it’s going to be interesting to see the solutions they build in the coming years to bridge some of that gap. I think probabilistic incrementality and all that’s going to play big.Alright, let’s wrap it up then. Anything else you wanted to share? We’re going to link to your LinkedIn and to Mobile Dev Memo, and your Twitter in the show notes, but anything else you wanted to share before we wrap up?01:01:37 Eric:No. I’m hoping that in 2022, I don’t talk about ATT at all. I would love it. I would love it if I could get back to just talking about stuff that I think is more evergreen and conceptual, versus specific policy level. I don’t know, we’ll see. Apple, maybe they reel me back in and they do something else that is extreme or egregious.It (ATT) happened. I wrote a post the other day, and I was like, “Look, this happened, it’s had a massive impact. Probably not going to go away. I don’t think there’s gonna be a reversal. So, you gotta learn to live with it.” Ultimately, I think companies will do that, and it’s also just a really exciting time.This is probably like the start of a new era of marketing science, and thinking about measurement, and thinking about how to bridge that with product design and product development in really cool ways. So, there’s a lot of work or design stuff that’s going to get changed as a result of this.I don’t know that you have a standalone marketing team, or a UAA team, as such. If you’re thinking about media mix models, what’s your UAA team? It’s just a lot of change, and a lot of exciting change. A lot of opportunity.There’s always opportunity to change.01:03:00 David:That’s a great place to leave it. Opportunity all across the board. There’s opportunity for apps to find new ways to find the users, and opportunities to fill those gaps in the tooling, as well.Eric, thanks so much for being on the podcast. Hopefully we can have you on in 2022 and not talk about ATT.01:03:21 Eric:Fingers crossed.Alright. Take care, buddy.
  • Sub Club podcast

    Growing an App to 1M Paid Subscribers — Ron Schneidermann, AllTrails

    52:00

    On the podcast, we talk with Ron about the magic of consumer subscriptions, experimenting with freemium strategies, and how private equity isn’t always as bad as you’ve been led to believe.Our guest today is Ron Schneidermann, CEO at AllTrails, the ultimate guide for outdoor adventures. AllTrails was early to the consumer subscription space, launching a $3/month premium tier way back in 2012. Ron joined as CMO and COO in 2015, and then took over as CEO in 2019, helping to grow AllTrails to over 1 million subscribers and tens of millions of active users worldwide.In this episode, you’ll learn: How to refine and optimize your freemium strategy Two things you need to keep an eye on as a founder The pros & cons of outside funding vs. organic growth How Ron fast-tracked AllTrails’ profitability Links & Resources Accenture Hotwire Yelp Liftopia Alex Honnold Spectrum Equity Ron Schneidermann’s Links Ron Schneidermann’s LinkedIn page AllTrails Celebrates 1 Million Paid Subscribers! (January press release) AllTrails’ website AllTrails is hiring Follow AllTrails on Twitter Follow us on Twitter: David Barnard Jacob Eiting RevenueCat Sub Club Episode Transcript00:00:00 David:Our guest today is Ron Schneidermann, CEO at AllTrails, the ultimate guide for outdoor adventures, AllTrails was early to the consumer subscription space, launching a $3 per month premium tier, way back in 2012. Ron joined as CMO and COO in 2015, and then took over as CEO in 2019, helping to grow AllTrails to over 1 million subscribers and tens of millions of active users world.On the podcast, we talk with Ron about the magic of consumer subscriptions, experimenting with freemium strategies, and how private equity isn’t always as bad as you’ve been led to believe.Hey, Ron! Welcome to the podcast. 00:00:59 Ron:Thanks for having me.00:01:00 David:Yeah. Really looking forward to the chat today. I wanted to kick it off, and most people know what AllTrails is, and it’s a fantastic brand. It kind of tells you what it is right there on the tin. What’s your pitch? We’re in 2021, post pandemic.Give us the short version of what AllTrails is. What does it mean? 00:01:21 Ron:Yeah. So AllTrails is a free app and website that helps you find trails all over the globe, so you can spend more time enjoying the outdoors, and spending time in nature.00:01:34 David:That’s awesome.00:01:35 Jacob:That’s a very nice mission. That’s way more beautiful than helping developers make more money. Both are important, but I can smell that. It smells, “piney” and I like it.00:01:46 David:Yeah, it smells like the Colorado forest. I haven’t been hiking forever, and doing all the research to chat with you today was like, oh man, I need to go hiking more.00:01:55 Ron:I heard there’s a great app for that.00:01:57 David:I heard that.So, I did want to also ask about your journey to AllTrails. You got there fairly early, and then grew in, and you’re now CEO. Tell me, off the bat, what led you to AllTrails way back in 2015 when it was just six people?00:02:20 Ron:Yeah. To answer that I’m going to go a little bit further back in time. My first job right after college was at Accenture, at a global management consulting firm. It was great. A good jumping off point, and I learned a ton. I didn’t know anything going into that job. You know, you get the rubber stamp and it opens doors.By the end of my third year there, I kind of had a realization. Epifany is a little too strong a word, but I just kind kinda realized I can’t take a job just for money again. The amount of time and energy that I was putting into it, and the lack of work-life balance, it really made me rethink who I want to be. Who does working Ron want to be?So, I was able to parlay that Accenture job into a biz dev role over at Hotwire, an online travel company. That was really where it opened my eyes. Like, I am so much happier, and I am honestly so much better when I’m working at something that I’m just personally passionate about.That guiding principle has really held through throughout my career trajectory. From Hotwire, I want to do my own startup in the ski space. I love to ski. So, I did that for nine years. It was a ton of fun. Then I was over at Yelp, doing growth for a bit. I love finding non-chain restaurants, and supporting mom and pop businesses, and stuff. I live in Yelp, so that was great.Then, when the opportunity for AllTrails presented itself, it was just kind of a no-brainer. Of course I’m going to take this.I’ll say this to you, one little addendum, one of the things I learned along the way, too. I am not a zero to one guy. That is not when I am at my best. It just causes me stress and anxiety, and just, figuring out how to keep the lights on for another day.So, again, knowing kind of that sense of self knowing. Like, alright, I’m best at B to C. I’m at my best when I’m using products I personally want to use and like talking about. I like hypergrowth, and I think that’s probably my sweet spot.So, it starts to all align when AllTrials showed up.00:04:34 David:Yeah. And then how did that go from? You joined the company as COO, right? And then, what was the progression inside the company to eventually taking over as CEO?00:04:45 Ron:Yeah. So if you want to demo and COO, I dunno why I really wanted to have both, like, I didn’t want to just be CMO in a vacuum, but not have any ownership or agency over kind of team composition and strategy and stuff. So I thought that it was really. Really important. And when you’re a six person company, it’s pretty easy to grab titles.It’s not like how to take it from anyone.00:05:08 Jacob:I was going to ask, like, I mean, it’s, it’s not like you see this a lot where it’s like a six person company and they had like five C-levels and you’re like, okay. Yeah, sure. Like, like my title, for example. But like, I’m kind of curious, like, you know, you like your background, you founded a company, like you were like a real CX whatever.Right? Like it’s not like it was fake. So how did, how did that, how did you go as like an executive, like choosing your next thing? That’d be a hell of a pitch to get you to like join a tiny little like, team like that.00:05:36 Ron:You know, I think I, I spent a lot of time thinking through again. I don’t know, I, to be perfectly honest, I was, I was a little bit bored at the end of my tenure at Yelp. I love Yelp. It’s a great company, but it was just, it was too big for me. And so I spent a lot of time thinking through what’s next again?That whole question, like zero to one. Do I need, do I need to start something myself or what? So the smallness didn’t bother me. I actually really liked the smallness cause it was almost like, it was almost like a cheat code. Like I got to do a startup, like basically from scratch, but I didn’t have to do it from scratch.And then.00:06:09 Jacob:They had, they had a kernel of something at00:06:11 Ron:They did, they did. And you know, it was actually to, to give my predecessor credit. It was, it was actually more than that. Like they had, they had solid product market fit from a monetization perspective. And then what really got me across the line with their product channel. And I feel like that’s often overlooked and that’s something you kind of pick up in time.Like it’s not just like, is this a product people are willing to pay money for, but just straight up, how are you going to get this out to market? And can you, can you do it in a way that is, you know, viable and scalable and, and ultimately, you know, going to be, be more efficient than, you know, it’s kind of like net out, right?Like the whole LTV to CAC thing and everything that00:06:49 Jacob:Yeah. It’s, it’s something more efficient than paying for every single install. Right.00:06:53 Ron:Exactly. And so. You know, I, it felt like there was good bones, you know, maybe it was like a fixer upper kind of house. but it had good bones, like it had, it had the foundation in place. And I could see, you know, back in 2015, the product sucked, it sucked. and, and what was shocking after I came was how bad the data was.I didn’t realize that when I was kind of doing my own diligence, but it was00:07:20 Jacob:You mean like analytics on the internally, what the company knew about itself or you mean like the, the, the trail00:07:25 Ron:The trail data, like the trail data that we were showing, you know, and that’s that’s subs high consequence. and so that was like a hard pivot, within a couple months, like, all right, this is, you know, all hands on deck thing.We’re not doing anything else until we figure this out. but again, it just, it felt like there was a diamond in the rough, in this one. You know, I’ve been here six years now and I can say like, unequivocally, this is the highlight of my career. Maybe I just got lucky. I don’t know. But, man, like, yeah, this has been a really, really great run so far.00:07:59 Jacob:I was just going to ask about the, that channel and monetization fit. I mean, I guess this was maybe I’m jumping ahead in our agenda here, but, but yeah, they were already charging a subscription before you got there. Right. And in terms of like monetization, maybe like describe that model a little bit and, and how that has changed.00:08:20 Ron:Yeah, I had never done this subscription business before coming here. So this was my first subscription business. And I’ll tell you, you guys already know this. I’m sure your listeners already know this too. subscription businesses are magical. Oh my goodness. Compared to like e-commerce or you’re trying to re when, you know, the transaction every single00:08:40 Jacob:I know I was looking at Hotwire just now, when you mentioned it. And I was just thinking about like, how many of those there were at that era, right? Like, and still are like, when you had to book a hotel on Google and they’re like, oh, here’s 15 different sites. You can actually like book it through it’s like Wolf,00:08:53 Ron:Oh, so tough. Same with Liftopia. Liftopia the ski startup. There was the same thing. Right. you know, but, but with a much smaller niche and segment, and then, and then Yelp is, you know, they’re, they’re kind of the media model and then trying to, you know, kind of pivot more towards like B2B and subscriptions for businesses and value added services and stuff.And coming here doing a consumer subscription business, an annual subscription, the auto renew. It’s like an annuity, like it just builds up every single year. Like obviously, like you can’t take retention for granted and I’m sure we’ll talk about that, but you know, just, if you’re able to kinda, you know, do a, do a pretty good job on the retention side and you see this thing build up And just.Raise the tide every single year that I’ve been here and have it just, is that much more momentum that just gets like brought into each new fiscal year for us. It’s just, it’s incredible. It is incredible. the leverage that it offers. So that was cool. That was definitely a, 00:09:51 Jacob:One of those good bones.00:09:54 David:Yeah. And that’s what I was going to ask you say the bones were good. Yeah, AllTrails had launched their subscription in 2012. So about three years before you joined, what was the state of that? And that’s really early in the kind of consumer subscription software space. Was there a lot of push back was like, how was traction, chargebacks and things like that was the bones were there, but were there some serious doubts or questions in your mind as to how this subscription app space was going to play out? 00:10:28 Ron:Yeah, I mean, so can I share a secret with you guys? I honestly didn’t know that our subscription business loss in 2012, until you guys showed me the research that you did leading up to this, I had always thought that, it launched with our ass. We launched our apps in, I think early 2015, I joined in September, 2018.And I just lumped everything together just in that, you know,00:10:53 Jacob:Yeah. It’s yeah,00:10:54 Ron:Yeah. So I, I, I had always thought that it, that we had launched it when our apps launched, but I guess we were on the cutting edge, the bleeding edge, the subscription space here.00:11:05 Jacob:So, so, but that, then I’m, then I’m correct to assume that, you know, if you launched a description 2012 was on the web, if you didn’t have apps until 20, 20, 15. Right. Right. Which, I mean, my, my experience, I guess I’ve been on old trails website, but like my vast majority of experience has been on the web.Right. Because I’m like, or sorry on the, on the phone because I’m going for a hike and I’m like, I need a map and like, boom, there’s AllTrails. Right. Which I guess is that channel fit. You’re talking about.00:11:27 Ron:Yeah. And that’s been, that’s been one of the cool things when I started. So a couple, a couple, I guess, data points, just to show like, sort of that, that snapshot in time of 2015, we probably had 20,000. subscribers at that point, maybe a million cumulative registered users since 2010, when we first launched and maybe 20,000 active paying subs.And in January of this year, we put out a press release. We don’t normally do that, but it was two pretty cool milestones. We had cracked 25 million registered users and a million paying subs at the start of this. So, you know, again, like the, the, the unlock has been really cool and very, very powerful. but the other thing, like you said, like this was, you know, a web driven subscription business.At first, when I, when I first started here. probably 70% of our, of our web traffic was desktop desktop to mobile 70 30. And obviously that’s inverted, since then, and then Mo the, the, the mobile apps, the native apps are by far the best form factor for what we’re trying to do. Like you said, Jake would like take it with you on the go, the navigation, the GPS stuff, everything baked in there.And so that’s become really the workhorses of, of subscription business and, and of our overall, UDC flat.00:12:42 Jacob:Yeah. I mean, it’s so helpful. you guys have good SEO when you search a trail, it comes up on AllTrails. Right. But that’s, I would imagine like this stage probably mostly like demand gen for the app,00:12:53 Ron:That’s exactly it. No, that’s exactly it. Right. So our se our legacy SEO, this is what, again, one of the beauties of being around for 11 years and counting, we have this amazing legacy SEO and that’s, that was that product channel fit that brought me here was the sales pitch was he just showed me Google analytics.And he just like, look, look at all of this for your00:13:12 Jacob:Just like a hyper-local very valuable data, right. Index. And if you’re, if you’re the winner, that’s a great real estate to00:13:20 Ron:I know. And, and so what we’ve been doing obviously as, sort of consumer behavior has changed and gone mobile first is, we’re able to parlay all of that mobile first SEO traffic it’s, incremental organic app installs, and that’s a huge driver. Of our business. We get millions and millions of incremental app installs that we don’t pay a dime for every mom’s.00:13:42 Jacob:Yeah. And going back to your point, like yeah. Not having to push. Up the hill completely is a bit, you know, you think about a Compounding annuity analogy as you made, right? Like the cost of that compounding really, you know, if you net out the whole asset, right? Like that’s going to be a big part of it is like, how much does it cost to push that that, that, that flywheel up a little bit. 00:14:02 Ron:It’s a moat for business too, you know, you’re around long enough and you’re doing something good. You’re going to see a ton of competitors start flooding into the space, which is great as validation of what we’re doing, but the product market fit product channel fit conundrum is, is real.It’s real. And you know, I see really great products, you know, beautifully designed products that just crank can’t crack the code on either of those. And then they kind of, you know, whether on the line, right? Like see it all the time.00:14:31 David:No, that was actually my next question is that in those early days, and you already said when you joined and when y’all launched the apps in 2015, they were crap. So take me, how did you go from this crap up and what experimentation, what pain, what suffering did 00:14:53 Jacob:There’s some, there’s some old, there’s some like a old guard at, at all trials that are going to listen to this and be like, crap. They were great.00:15:00 David:But what did it take and what was the approach to, to find you, you had some level of product market fit, but then to actually build a great product around those early signs. 00:15:12 Ron:There, there are a couple of philosophical things that we decided immediately. One was around funding. Do we want to go take funding, and try and do this faster? Do we want to do this kind of organically? And my predecessor had done a small seed round. I think he raised 3 million bucks in 2012.And we were still kind of drafting off of that. And then there was a little bit of subscription revenue and then a whole bunch of just, you know, classic entrepreneur head on the swivel stuff. Like let’s throw a bunch of shit up on the wall. Like, let’s see what we can do. So there’s, you know, a media play and programmatic ads.Whatever, right. Just trying to buy time more than anything. Right? Like keep the servers running for a little bit longer. But we decided we very intentionally decided not to take funding. We wanted to control our own destiny. And part of it to be clear, part of it was the handshake agreement with the original founder, was to grow it and sell it.He wanted us to, to, to sell it. And so, so then if that was kind of the. The Mandy. And I was like, well, why would we even just, you know, deal with the, the opportunity cost and the headache of going out and trying to raise funds, as a pain in the ass. So, you know, it was like, let’s just, let’s put our heads00:16:22 Jacob:Especially, especially for our consumer subscription company in 2015, like00:16:27 Ron:Right? Yeah.00:16:28 Jacob:Ben kind of been party to that. It’s not, it wasn’t easy. Let’s put it that way.00:16:32 Ron:Tried doing it in 2005, by the way I was with Liftopia was insane anyways. but so we decided to put our heads down and just say super scrappy, super scrappy, super lean. And so, it just came down to like relentless prioritization and essentially what we ended up doing was triaging sort of a different funnel metric each quarter.Right. So one quarter is. We’ve got to tackle bounce rate. All right. Now we’ve got to tackle signup rate and now we’ve got to tackle pro conversion rate. And now we’ve got to talk over attention and we just kind of spent cycles, through 2016 and through 2017, just each, each quarter, just like laser focus in on that one metric and do what we can and then move.And it worked because by the end of 2017, we actually achieved profitability. Which was cool, which was really, really great. You know, like we wanted again, when you’ve been around the block long enough, you talked to enough entrepreneurs, you’ve seen, you’ve seen enough. there’s so many examples of people going and getting too much funding too soon, and then they develop bad habits, right?Yeah. Let’s get a little hot in here. Is it.00:17:36 Jacob:I never heard of that.00:17:39 Ron:So, you know, but so you see it right? Like that you, you get the, unsustainable growth channels, again, the product channel fit question, like how are you actually going to bring this to market? And how are you going to do it when that VC money dries up? Like, is this actually00:17:50 Jacob:Five X that VC money, right.00:17:52 Ron:Right? Is this sustainable?Or you’re just connecting yourself to the next round of00:17:56 Jacob:You can put yourself in a, in a dead man’s corner, right. Where you’re not your, market’s not big enough, whatever you end up killing and otherwise like really great business,00:18:05 Ron:Totally. And I, you know, I’d seen that, I’d seen that. I really didn’t want to do that here. It felt like because so much of our growth was coming through SEO. It felt like obviously there’s an opportunity, which we later unlocked on the ASO side of things. It felt like even beyond both of those though, it’s just like word of mouth and PR and viral loops and network effects.00:18:27 Jacob:Product market fit as a broad thing, right? Like growth kind of have you have a really good product and it serves a niche, like grit just starts to start to go.00:18:36 Ron:And especially organic growth, right? Like, and that was really the big key as like, do we need to be like one of these DTC companies and just raise millions of dollars for Instagram ads? Or can we, can we do something that’s more sustainable for the long haul? And that was, that was one of the bats.The other big bet that we placed was, from a brand positioning perspective. You know, when I came in the app was definitely geared towards like the through hikers and search and rescue and, and the hardcore, like, you know, back country folks. And the challenge with, with, with that segment is that there’s always these, you know, really esoteric and extreme product requirements that they want because they’re they’re edge cases.They’re by definition, all edge cases. And in this space in particular, a lot of them. Kind of living the, you know, the van life, life, you know, trying to live as frugally as possible. and so they don’t want to really pay you any money either. It’s like this isn’t a good growth segment. We got, we gotta rethink this one.And so, I’ve told this story a lot, you know, this strong man to this day still is, is my wife where like she likes going outside with me. You know, she’s always down to go on a high. you know, spend time outside. We have three kids, totally trying to raise them on the trail. we have a dog who loves being on the trail and, but, but if I’m not there, you know, she’s, she’s not going out there.Right. So it’s like, okay, okay. Maybe here’s the play. Like what, what if we use technology? Kind of tear down the barriers for entry, like instill confidence, whether through like product functionality or content, but really make it so that someone like my wife and the hundreds of millions of people around the globe, like her who, who know that they feel better when they time spend in nature.They’re just a little scared to do it. Like, can we help augment that? Can we help supplement that? And I think that’s going to be the unlock. And that was the big bet. That was the other big bet that we placed in 2015. And you know, 00:20:30 Jacob:And just to summarize that, I understand it’s like to kind of not ignore these like extreme users that are on the edge on the edges, you know, serve them, but maybe not in the way that they would want, but like let’s focus on, you know, this larger segment. I mean, I think that’s the thing, even some good founder advice is good for founders.Sometimes doesn’t always apply. Like B to C stuff sometimes where it’s like, yeah, like, listen to your most vocal users often. There’s something there, but like with an ounce of like moderation, because yeah. They can lead you in really strange places. And think about the network. Think about the like user.Maybe you’re not talking to her, her the next year saying next a hundred million users that you have to get. and that’s potentially a much bigger surface area. And that doesn’t mean you’re going to abandon those court users. Like they might grumble a little bit and they might not be totally served by your use case.And like, that’s maybe just life. but, but you know, you’ve now potentially, like if you think about the, you know, the mission of just getting people outdoors, like you’ve achieved that much better by going for this much larger market segment. Right.00:21:31 Ron:Yeah, and they’re not mutually exclusive. It’s just which one are we prioritizing? Which one are we preferencing? And how are we, you know, what kind of language are we? Are we using lingo or not? Right. Are we making this accessible for everybody or not for imagery? Right. Are we doing like, you know, Alex, Honnold like dangling one handed off of a cliff,00:21:51 Jacob:Or just, or just a picture of the N the end cap at an REI, Right. Like,00:21:56 Ron:Yeah. Yeah. Or, or just like, you know, a family like smiling and having fun out in nature together, you know, like, all right. It doesn’t cater to the core, but they’re not necessarily going to like walk away because they see that stuff either. 00:22:07 Jacob:Right. I mean, and that comes to. Channel fit As well, right? Like not your products fit and your products oriented for, and that like B to C you kind of, you can’t divorce the two, like you can’t have totally independent marketing and channel channels for the product itself, which maybe you could get away with a little bit in B2B.But, but, but they, but they don’t necessarily have to be like completely like linked, you know, you can kind of serve both niches on the, on the product side to your point.00:22:34 David:And speaking of getting more folks out in the mission of AllTrails. I’d love to hear about your freemium strategy, because that’s a huge part of it. Like what early on, what was your approach? And then how did that evolve over time? As far as what features you do give away for free to kind of reach the broadest audience possible, and then what things you pay wall to actually get paid? 00:22:57 Jacob:And, and, and I’d like to highlight how Ron, when we asked you to describe AllTrails, you put free in the name, which I’m sure was very intentional. Right? You said it is a free app, right? It is not a premium app. I mean, it is a premium app, but the highlight the free. So00:23:09 Ron:Yeah,00:23:10 Jacob:That framing, what, what, tell us about your free app.00:23:13 Ron:There’s, this is a, this is, an ongoing. Like not debate, but, it’s an open question always. And we’re constantly like asking our employees and our board, like let’s challenge our assumptions here just because we did something a certain way last year. Doesn’t mean we need to do it this way.Like let’s constantly reevaluate this, for us, there’s sort of three main buckets we have. Free on authenticated users and then we have free registered users. So kind of that registration wall is like the first key funnel, metric. And then there’s, pro subscribers, right? So we have two, two kind of core, success metrics.One is registration rate and one is pro conversion rate. And then what goes in front and behind the paywall and the red wall, the registration wall. Constantly influx constantly. And plus we actually just did this really fun workshop a couple of weeks ago, internally here. It was like the history of AllTrailss pro and just showing kind of which features started when I, you know, again in 2015, like what was the pro feature set?How much of those? We actually ended up pulling in front of the red wall and new features that we put back behind the paywall. So I feel like we’re constantly in a state of experimentation here. we’ve been, we’ve been experimenting with that since day one. We’ve been experimenting with pricing also on day one.And there’s still, I don’t feel like we’ve cracked the code at all at all. When I, when I first started here, I’ll chose pro was 50 bucks a year and I spent the first, like two months just trying to get as, as much like, obviously all the quant data that I could get my hands on, but as much qualitative data as I could get to.So reading every app store review, every Reddit thread, every blog post. Talking to customers, all of it. And aside from everyone telling us that our data socked and, you know, we can, we got them lost. So we got them tickets from the park ranger for telling them to bring a dog when it’s not that currently, whatever it was.The other piece of feedback that we got was like 50 bucks, like it’s way too much. And so we immediately started testing pricing and, and, and we tested it at 30 bucks a year and we tested that 15 bucks a year to kinda all right. If we really just take that price down is, the in incremental, purchase rate, gonna offset, you know, the, the change in that revenue per transaction.They were about to wash it, which was really interesting from a net revenue perspective, 15 bucks a year versus 30 bucks a year was, was basically flat. But we went with 30 because it gave us more maneuverability. We could do more. for the folks who were like price sensitive, do do discounting, intro offers, whatever.At 15, we really couldn’t go any low, lower. So it’s just like, this is it for everybody all the time. but even that we’re revisiting now and thinking through like, all right, maybe are there other different tiers? We’ve never done monthly before. So what is, what is a world in which there’s a monthly price?I don’t, I don’t love it. I mean, again, annual is magic. Like why mess with a good thing, but there is a cohort of users, especially outside of the U S where that’s a pretty high00:26:16 Jacob:Oh, I mean, I live in the Midwest. Like I would, I only need your app from, from April to November. Right. Like I really don’t need to pay all year.00:26:24 Ron:For the two weeks in00:26:25 Jacob:Yeah. I, but I mean, I think there’s the counter argument there of the simplicity. It’s like, yeah, sure. But. Whatever your value is. So your, your, your, this is the price.I really, I I’ve seen that effect before on the price experimentation, you just end up with the same area under the curve. Like, no matter how you move it, and some apps are like that, some apps are not. but I do think it’s really fascinating, the wisdom of crowds, right. And just how, like, they know like the, the, the, the masses have priced and valued your products.And then just like showing that like, it’s very efficient, right. No matter where it goes, then you can come down to like, It’s almost a good place to be. Cause then yeah, you have that like opera, you can choose where you want it to price. You can basically, you’re freed from the like fiduciary duty of like maximum extraction.And you can like, like, just focus on like, okay, what’s gonna what’s right. For us for some of those goals on company growth and stuff like that. If it was right for the mission. And then like also give yourself some like tactical opportunities in terms of discounting and other stuff like this, and then positioning as well.Like what is it? I think that’s almost as important. It’s like, how do you use. How do you see all trials? Like how do you see it as like, what’s the value of perception? Like a $30 skew and a 50 and a 15, those are very different. Right. And those are, you know, I think about consumer goods on those scales.That’s like each one of those things has like a different, like, feel to it.00:27:43 Ron:Totally. And, and then on top of it, though, our business is driven by UGC, right? We have this classic UGC flywheel. And so obviously we know our pro users are more engaged, but a ton of engagement comes from our free users as well. And so you can’t kind of, turn the squeeze on them too hard without like really fundamentally damaging the business.00:28:05 Jacob:What kind of user generated content? Is it like pictures and updated and stuff or what? What’s00:28:10 Ron:Yeah, ratings, reviews, photos, recordings, you know, and then there’s this also this virtuous cycle that we have, this beautiful relationship we have with our users, where they, they help us create as well as Curie our trail Content. So that’s the thing with trail content, just to go down this rabbit hole for a second, Joe Content, super fluid, like it’s not like streets that are, that are relatively static.You know, a trail is you get, you get flooding, you get fires, you get maintenance, you get development, down trees, whatever. Like they’re constantly in a state of flux. And it’s really, really hard to stay on top of it. We can’t do it alone. And so we00:28:49 Jacob:And there’s no, it’s not like, it’s not like roads where there’s like a national database, right. Of like uniform data00:28:55 Ron:Yeah, no, not at all. Right. so we, we do. We have this like really beautiful symbiotic relationship with our, with our users, you know, and, and it’s kind of like, we both get value from each other and we’re both very transparent about like the relationship, like you guys help us and you help the community.Right. And we’ll package it. We’ll, we’ll keep improving and investing in the product experience and everything else. and again, like, this is where it seems to be working, but this is when, when we were talking about. Th th the choke points in the funnel and that, that red wall and the broken version Weill, this is the thing that’s top of mind over all of it. 00:29:30 David:Yeah, that’s great. I did want to move on and talk about in 2018, AllTrails raised, 75 million led by spectrum equity. And so I’m curious about that, about that story. So, I know, you know, the plan was to sell and then you’ve shared on other podcasts that, part of that was the founder taking, taking some money kind of his exit event.But I’m really curious just from like a company building perspective. I think so many founders and entrepreneurs think, oh, if I can just. More money. If I can just hire more people, everything’s going to be easier. but I imagine that’s not the full story. So I’d love to hear about the raise, but then also kind of how that changed the company and changed the trajectory.00:30:18 Ron:Yeah. So like I said earlier, right. That the handshake agreement was to grow and sell it. So we knew going in exactly what the deal was. and once we hit profitability in 2017, it kind of felt like, all right, it’s probably next year. It’s probably our year. And we got an inbound from one of the big tech companies early, you know, probably end of Q1 of 2018.And so I was like, all right, game on, right? This is it. We’ll go get a bank. we’ll run a formal process here. And we started going through it. We started going through it. This was actually, it was fun, right? Like I got to put together sort of like, all right, here’s our top 100 strategic partnerships broken out by category, broken out by vertical.Here’s like the, you know, the accretive value here is, you know, the, the investment credit. It was like a really fun thought exercise. You know, we’re talking to online travel companies and real estate companies, and obviously like the retailers and just so many different types of companies out there. And we ran a process and it was, it was fun.But, and as we were going through it, well, a couple things happen. One is our business really took off. Like it was a breakout trajectory year for us. So that always helps. Anytime you, you meet with someone, you share your plan and then you come back a month later and it’s like, Hey, actually, Outperforming outpacing.So your price just went up. so that was, I mean, that was great. Like a great position to be in. I’ve never had leveraged like that. And the other, the other thing was like, we could walk away at any point. If we, if we didn’t like it, I had done a lot of fundraising before and that I’ve never had a position of, of leverage like that.So that was cool. But as we were going through the process and talking to these different strategic acquires, the other thing that kept jumping out was like, I don’t want to just go be middle management at some big company that I already like have chosen not to work out anyways, because it doesn’t align with what I want to do with my time.And so, you know, we’re kind of going through, it’s like, is this really, is this it is this the only path? and we’re talking to our bankers about it and like, you know, there’s a, a huge ecosystem of financial investors that are really excited about this consumer subscription space. let’s, let’s do a spike there.And so we started talking to somebody. Different financial firms out there. And that’s where it got really, really interesting. you know, I think, I think we all probably have preconceptions about like private equity groups, like, you know, I know, right.00:32:36 Jacob:Just, it then the light dimmed here. When you said00:32:39 Ron:I know, cause a lot of the classic ones, they’re just there in your shorts about like your bottom line expenses and micromanaging and telling you to cut costs and00:32:47 Jacob:That’s, that’s the, that’s the, the stereotype at least.00:32:50 Ron:Totally right. but there’s this whole class of growth equity shops out there and, and we, we sort of plugged into it and I would squarely put spectrum equity and that one, and the first time we talked to them, it was so clear. They’re like, you guys, aren’t thinking big enough. It’s like, what? I love that.Okay. Let’s talk growth. You know, like you guys need to be thinking global. Right. And it was just like, there was so much alignment around. This, this opportunity in front of us. And instead of like pulling the rip cord and just kind of being absorbed and integrated into something else, it’s like, how about, like, we really make a, make a run at this.And so the more we talk to them, the more it’s was like, yes, hell yes. And it wasn’t just from like, a funding perspective, you know? Cause if it was just that like again, then you just do an auction and you just see whoever’s the highest. But we really wanted, like I needed a partner. I wanted a value added partner that I wanted someone who could bring in, you know, a sense of community, not have to reinvent the wheel all the time.That’s always nice when you can plug into our portfolio of similar companies and just pick their brain. All right. Like how did you guys00:33:54 Jacob:Yeah. I mean, that’s an under, that’s an underappreciated aspect of raising versus like going at your own. It’s like the network, like it’s, I think feces oversell it, but maybe founders undervalue it. Right? Like00:34:05 Ron:A hundred percent. Couldn’t agree more. It does. It really does. and so yeah, we kinda went, yeah. I, I feel incredibly fortunate that we were able to partner up with spectrum equity. And so David two question, I have, it’s like it for us, it was this huge unlock. It was this huge online. Like we have another partner, we’re going to be more formal, with our board structure and, you know, the, the sort of like metrics, which is great, like we needed to level up, and our corporate diligence and everything.And they’ve been, they’ve been a partner and we’ve, we’ve grown the board. We’ve added more expertise. And again, like the, the portfolio being, being sister companies with, with like Headspace and the not worldwide and survey monkey, whatever, like these cool companies that I respect and be able to, you know, hit up the CEO and be like, okay, how did you guys deal with this?Because like you said, like there are a ton of challenges that come when you’re going through that, you know, that the slope of the curve at that point, right? Like the true hyper-growth curves. All right. You know, we can’t fall back on, on money as an excuse, you know, like it’s purely an execution play and how do we do more faster?And that’s honestly like, that’s my, I think one of the coolest things I can say about my board, that the single biggest piece of feedback I get from them where they’re just like yelling at me all the time and a great way. It’s like, you gotta do more faster. Why aren’t you doing more faster? Right. Like that is the mantra here because everyone sees this opportunity.It’s ours, it’s ours to go take. Right. But we got to execute and do it as fast as we can.00:35:33 Jacob:Yeah. That’s that’s, I mean, I’ll say as somebody recently constructing a board, like that was sort of my cause as a founder and as a CEO, like you’re always, you’re just, you’re you’re at, you should be at the limits if you’re doing your job. Right, right. Like you should be kind of feeling at least like thinking, you know, what your limits are and what the company’s limits are.And it’s nice. Even if there isn’t anything more you can do. It’s nice to have some people who like, ostensibly are aligned with you to be like, Are you sure there’s not more right? Like, is there anything like, are you doing like, could, could you change this? Like, could you go go faster potentially? And sometimes the answer’s no, but it does always kinda, you leave those board meetings going like, like maybe there is like, maybe there is some way we could do this, like better or faster, right.00:36:10 Ron:Yeah. And then you build a team, right? And that leads back to like the team growth. And this, you know, this is our third year in a row of, of doubling head count. Hopefully next year will be our fourth year in a row. And all of the leverage, I’m a big believer, like two things are the lifeblood for companies like ours.One is culture and the other is momentum. And you can’t, if you lose either of them, Right. Like, you cannot take your eye off of either of those as a CEO, as a founder, whatever it is. and so like building both, you know, they, they got to go hand in hand, or you can sacrifice culture as you’re doing the internal hypergrowth.00:36:43 Jacob:Have an exit strategy, right?00:36:45 Ron:Exactly.00:36:46 Jacob:Going to last very long.00:36:47 Ron:Because you’ll never get it back. That’s exactly right. But, but generating momentum through like value added hires and raising the bar or bringing, you know, a bringing in a plus, I love being the dumbest person in the room. That’s my favorite thing at all. Choose walking in there. It was like, all right, I’m going to learn something.Someone’s going to teach me something cool. and building a team.00:37:06 David:So it sounds like the biggest unlock for y’all taking the money was just the ability to hire faster, hire better folks, offer better pay. but was there anything else that you feel like taking funding helped unlock for AllTrails? Did you, were you able to spend Mo did you start spending more on, on user acquisition or ramping anything else out? 00:37:27 Jacob:Can I ask a clarifying question without like you sharing your term sheet or whatever, but like D w like these, these deals can be very different than like a venture deal, right. Where like, almost always all of it hits the books and it’s dilutive, meaning that the company gets the money, but this was like kind of a buyout for the founder as an alternative to a sale.It’s like, did you guys structure it? So some hit the books and not, or was it all to the founders or how did it, whatever you’re comfortable00:37:50 Ron:We, we hardly took any primary capital in 2018. I didn’t, I didn’t want it. I don’t want it. Like I liked our organic trajectory. I didn’t want. And obviously I’ve gotten to know spectrum a lot better. They’re not built from the CNA, but you take money from a VC. And the expectation is like the success metric is suspended as hard and aggressive as possible because they’re incentivized to keep you hooked, you know, on the next round.And I wanted to, you know, accelerate more like on the product development side of things, but I didn’t want to get stuck in a, a growth model that’s dependent on unsustainable paid acquisition. Right. So. almost the entire deal with secondary capital, which was great, which was00:38:33 Jacob:And for the financial illiterate IME, like 18 months ago,00:38:37 Ron:Yeah,00:38:38 Jacob:The company gets the money. Secondary would be somebody who’s already a shareholder gets the00:38:41 Ron:Exactly the people on the cap table. so it was buying out the founder, buying out the original investors, like really cleaning it out. It was a new chapter, a new book altogether. At that point and, you know, start sort of starting together. I think, you know, to the question earlier, in terms of like the other value as like, I really can’t stress enough, just the strategic value add that I was able to get like, again, because as a founder or as a CEO or as an example, You’re kind of stuck in your own head a lot and you can talk to other founders, but you know, there’s this like culture, especially in Silicon valley, like, oh bro, coaching it.Yeah. I mean just crushing it, you know? No, one’s, you know.00:39:19 Jacob:I didn’t, you didn’t have to put air quotes around culture there, but like, I could hear the00:39:24 Ron:Yeah.00:39:24 Jacob:I’m called.00:39:25 Ron:You know, and very few people are like really open and transparent, about the challenges and what have you. And so being able to go in. and have this board that I trust that I feel like we’re all aligned. I’ve had boards, you know, especially VC backed boards, where you get like a different, you know, venture capitalists from every round that you do.Like you have a lot of misaligned incentives. You have a lot of sharp elbows in a room.00:39:47 Jacob:I was gonna say, there’s a lot of, you know, these are all competitors in a lot of cases, right? Hopefully you pick well, and you have people that are professionals, but like you can totally end up in a situation where you have frenemies,00:39:57 Ron:Yeah, you’re watching your back at your own boards. That’s a horrible way to live. Whereas with this one, it was so clean. It was like, we were owned by spectrum. This is great. I work at on their behalf. This is great. We’ve got the two of them there’s me. And then, and then, but to their credit, they’re like, let’s bring on two more operators.And so, you know, they didn’t care about like, well, we have to have 51% plus of the seats. It was just like, no, let’s just surround ourselves with really awesome. And so we got, you know, we got the former CEO of ancestry, who, you know, they know a thing or two about, subscription businesses. And then we got the COO of Robin hood and obviously like they know a thing or two about hyper-growth and everything else.And again, like, so it’s almost like it’s this team, you know, it’s like this dream team we’re just collectively, like they’re helping me chart stuff. Like see things. I wouldn’t have been able to see on my own, whatever the pattern00:40:45 Jacob:Yeah.I mean, I think it’s, it’s, it’s a good story in the sense that like, I think, I think we think too terminally sometimes about companies, right? Like it’s like, they’re born, they are grown and then they get sold and then they die usually like nine times out of 10, right? Like it’s, it’s not often that an intern, like I say, all goes well and the integration goes, well, some spectrum of results.Right. But this is a result where I think you, you guys have a company that’s two important. To let die, right? Like if you had sold, I don’t know what, you know, your fangs or whoever was like, I’m sure I could see any number of massive tech company wanting this to be a part of their data set or part of their like social, like aspect of whatever.It’s just, I could see a plugging into a lot of things, but you know, to get Google’s exciting acquisition today and not saying you guys. Talking to Google or not, but as an example, like their exciting acquisition today is tomorrow is like, you know, happy trails, blog posts, right. That actually a good name for the, the shutting down AllTrails, acquisition at Google blogposts.But, but the, you know, and this is a, this is a path where, you know, people who are passionate about the mission, the employees and the users, like can kind of, you know, get that exit that people are looking for. But without like jeopardizing. Thing that’s important. And like, maybe this is very hippie, right?But like, I think there is some aspect of companies that’s beyond like the capital value and beyond like, even like the culture, but like actually achieving the mission and, and making that change in the world or providing that service. That’s, that’s, that’s more important than, you know, Hypergrowth or whatever.And look, I mean, we should get into talking about now, like posts around, but it sounds like you guys are in hyper-growth anyway. Right. So it didn’t, it’s not like it’s, it’s this false dichotomy of right. Like either you’re like raising for venture and you’re like going at it really hard or Like you’re a lifestyle business or, you know, whatever.And it’s just like, Maybe, whereas maybe us like lampooning, this straw man of a false narrative has like most of the talking about this to like make that is the, the, the totality of the false dichotomy is us talking about it. But I really think this is a great example of like one of those like interesting, you know, outcomes and, and stories.So it tell us about what’s happening now. 00:42:52 David:I appreciate you sharing that specifically because even in researching it, I listened to a couple of your other interviews. I still assume that that the. A pretty big primary chunk that, that went into the balance sheet of the company and then it accelerated it from there. So it’s an even more interesting story to me that that raise was mostly secondary.So from the $3 million seed way back in, whatever it was 20 12, 20 13, it really has been an almost bootstrapped company and becoming what it is today on. Little capital is really incredible and it really kind of speaks to consumer subscription space and, and how you can operate and go big without spending a ton of money.If you do it right. If you don’t, if you don’t just plug into Instagram and blow $5 million of VC money acquiring the wrong users, if you actually talk to them and build a good product and everything else. but I did00:43:55 Ron:Well, and I was just stay on top of not only that at the first board meeting that we had with. I, I walked in and I said, Hey, you know, this is great high five super-stoked, we’re also, I think we should donate 1% of our revenue to environmental causes. I know you guys just shelled out a whole lot of money, but would that be okay?And to their credit, they’re like Yeah, let’s do it. Let’s do it. And you know, one of the first things we did post-transaction was signing up for 1% for the planet, you know, like there there’s totally a different path here. I didn’t realize it. And I think it’s cool for people.I don’t know. I, I wish I heard this earlier in my career. Like there are, like you said, like there’s not a dichotomy, like there’s so many different ways to do this. I think we have. Fetishizing almost, or like putting on a pedestal this whole like massive VC round kind of stuff, you know, and there’s a time and a place for it, for sure.But like, that’s not the success metric in and of itself, like more often than not, especially for earlier companies, the death knell. And so I think that, I’m always, you know, I get, I get hit up by people, you know, for whatever I’ll all the time talking about this kind of stuff. And so I was like, dude, if you can boot shop, if you can control your own destiny, like do it, you know, find right partners that are gonna unlock growth and everything else.Don’t fall, don’t fall victim to that. Like, just that story that you think is like the classic Silicon valley startup story, which is you go out, you raise a big round and you have an IPO. It never works. It never works that way00:45:19 Jacob:Who would do that?00:45:20 Ron:To too many man.00:45:22 Jacob:We’re running out of time. I do want to know. So you’re talking about like doubling and so I’m guessing like the pandemic, like we’ve seen across the ecosystem has been really, especially, I can imagine there’s two aspects to it, right? Like one your digital service.And then secondly, like you’re very good compatible with like, social distancing. So did you like think you would be having this conversation for whatever four years after the spectrum, deal like doubling every head count every year? Cause that’s typically not what private equity companies growth rates look like.00:45:51 Ron:I know. No, it was, I mean, so I’ll preface this by saying we were incredibly fortunate during COVID and sometimes you just get lucky. Sometimes you get like, there’s a ton of great companies out there that just like how to pull sales reps out of the field, or we’re an equip for like the supply chain issues or whatever it was.Right. Like, Well, like you said, we’re digital first company. we, we already, we had a somewhat distributed workforce, so we already like using zoom and slack and going fully remote. Like we, we saw no, no drop in productivity. Now granted like when, when the world shut down mid-March that was a little bit scary.But we knew it would be temporary. I, you know how long no one really knew. Bye bye. Mid April, we were going to our board and saying like, look like, I know things look a little bleak right now. Like the, the machine has fully ground to a hall, but we think actually like this is going to be an insane accelerant.Once things open back up, there’s nothing to do. Like you said, it lends itself perfectly to social distancing. You know, people who can’t travel anymore. Like, all right, we’re going to explore our local state parks now, you know, like we’ll scratch that. It’s that way I got three kids and you know, school is canceled and obviously, you know, summer camps forget.What are we going to do? What are we going to do with these kids? And it’s like, we’re going to run them ragged on the trail, you know, every weekend we’re just going on the trail and we’re running them ragged and00:47:10 Jacob:There’s a good ad campaign in there. Just00:47:11 Ron:Totally right. And so,00:47:13 Jacob:Sleeping kids in the back of a Subaru Forester and it’s like,00:47:16 Ron:Yes, exactly. So, I mean, you know, we made, we did make a big strategic decision, to get in front of it and, and start hiring like crazy, and just make, you know, make a play, make a play. And, and again, Sometimes you get lucky. you know, that works, that works all these companies around us, that we were never able to like really poach from or whatever.Something like we’re able to go grab their talent. Like not just from people who are like, oh, but people were actively working there who were just like, I don’t want to do this with my life anymore. I like spending time outside. I had the number of people, the number of inbound applicants that like write in their cover letter.I was looking at which apps I use the most. And I just started applying to those jobs. You know, I think that there really is. It’s like really. Great. And I applaud it and I love it. And I hope it never stops people like taking more agency and control over their career and not just like reactively, you know, just doing whatever leftovers00:48:10 Jacob:Yeah. I mean, the geographic unlock of remote, I think is a big part of that. Right. Cause suddenly like you’re, you can just literally go on your phone and pretty probably today, nine times out of 10, you’re going to be able to work for that company depending on your like, you know, locale or like time00:48:22 Ron:Totally.00:48:23 Jacob:It wasn’t that way two years ago,00:48:25 Ron:Not at all, not at all. Exactly. So, a lot changed. A lot has changed in this time. With all of that, with the big accelerant they were seeing on the usability side through 2020, there is, I think David, you had asked this like pre pre-show, you know: there’s two big questions hanging over our business as we went into 2021.One is, are the registered users who we got last year during COVID are they going to convert to pro like our conversion to pro happens over time? We look at a lot of stuff through a cohorted basis, and it goes up and to the right. It will take years for some users across the line to go pro, but it’s great.It just keeps going up. So, are the folks who signed up when there was nothing else to do, are they ever going to convert to pro or not? The other big question is: all the folks who converted to pro in the height of the pandemic in 2020, once the world opens up, are they going to retain? Or, are we going to have the bottom drop out from under us?These were two questions hanging over our heads. We have a seasonal business, it follows the sun pretty much. So, as we headed into May, June, July of this year, thankfully that the answer for both was a resounding “yes.” The folks who signed up last year are converting at a higher rate than normal.The folks who subscribed are retaining at higher rates than normal, too. And I think it’s kind of more of a testament to how the zeitgeists has changed a little bit post pandemic. Being outside just makes people feel good. I guess it’s that simple. It’s not very complicated.You feel better when you spend time outside, and people are just incorporating it into their regular routines.00:50:08 Jacob:Yeah. It’s interesting. For positives and negatives, I think you came up three cherries, right? It just really lined up, and then it’s continued. You’re talking about the hiring thing, too. Like a lot of habits changed during COVID, and I don’t think anything will necessarily go back. Especially if people have found a new, happier, maximum for their lives. You guys are part of that. That’s great. and that seems like, I dunno, we don’t have total good analytic quantitative data on this, but it doesn’t seem like the whole boosts from last year totally collapsed.It seems like it just was like an accelerate, and I think other industries would sort of back that up. 00:50:54 David:Yep. Well, we’re coming up on time. Is there anything else I should’ve asked you? 00:50:59 Ron:No, this was fun.00:51:00 Jacob:You guys are probably hiring, right?00:51:02 Ron:We’re hiring like crazy right now. Yeah, absolutely.00:51:06 Jacob:AllTrails?00:51:07 Ron:Yeah.00:51:08 Jacob:There you go.00:51:08 David:Any particular roles you want to shout out? 00:51:11 Ron:We’re always starving for great engineering talent. Android, iOS, front end, back end dev ops, security, all of it. PMs, product designers, mapping designers, customer support, the full gamut. The entire company, every department is hiring right now.00:51:28 David:Well, it sounds like a really fun company to work for. We’ll put links to your job page and to your personal LinkedIn, and a few other places in the show notes, but this was really fun chatting with you today, Ron. Thank you so much for taking the time. 00:51:41 Ron:My pleasure guys. Thanks for having me. This was fun.
  • Sub Club podcast

    Optimizing Your Subscription App for Growth — Eric Crowley, GP Bullhound

    54:12

    Our guest today is Eric Crowley, a tech investment banker with GP Bullhound. With investments in companies ranging from Spotify to Whoop, and clients such as AllTrails, Pinkbike, and Lingoda, GP Bullhound provides transaction advice and capital to many of the leaders in the Consumer Subscription Software space.On the podcast we talk with Eric about his 2021 report on Consumer Subscription Software, the truth about LTV calculations, and the new era of organic user acquisition.In this episode, you’ll learn: Was 2020 just a “COVID Bump,” or a shift in consumer behavior? Are the Bumble & Duolingo IPO multiples justified? How savvy developers are adapting to Apple’s App Tracking Transparency The truth about LTV The new era of customer acquisition Links & Resources Spotify Whoop AllTrails Pinkbike Lingoda Bumble Duolingo Instacart Match Group Netflix Noom Weight Watchers Tinder The Dyrt Day One Journal Automattic Tech Crunch Scribd Pandora Eric Crowley’s Links Follow Eric on Twitter GP Bullhound GP Bullhound insights Eric’s LinkedIn GP Bullhound 2021 CSS survey Follow us on Twitter: David Barnard Jacob Eiting RevenueCat Sub Club Episode Transcript00:00:00 David:Hello, I’m your host. David Bernard. And with me, as always, RevenueCat CEO, Jacob Eiting. Our guest today is Eric Crowley, a tech investment banker with GP Bullhound. With investments in companies ranging from Spotify to Whoop, and clients such as AllTrails Pinkbike, and Lingoda, GP Bullhound provides transaction advice and capital to many of the leaders in consumer subscription software.On the podcast, we talk with Eric about his 2021 report on consumer subscription software, the truth about LTV calculations, and the new era of organic user acquisition.Hey, Eric, welcome to the podcast.00:00:56 Eric:Hey, David, Jacob. Thanks for having me back. It’s always a pleasure. 00:00:59 David:Yeah. Every year you release this report, so we had to get you back. This is the third annual Consumer Subscription Software Report, and I wanted to kick off just asking you a little bit about the motivation, and where your headspace is in thinking about creating this. Who the target is, and what kind of questions you’re asking yourself as you prepare this report.00:01:24 Eric:Yeah. The report is the GP Bullhound Consumer Subscription Software Report. I call it CSS, which is kind of a playoff SaaS. This is the third year I’ve been writing it, and it started back in 2018. I worked with a company called AllTrails that was starting to monetize really well by selling subscriptions.It was like a light bulb went off in my head. I was like, this is a phenomenal way to provide a consistently improving product to consumers, where the margins are pretty good. It’s easy to access a ton of different people globally through the app stores or through the web, and I just got really excited about it.I started putting some notes down on my own, and then GP Bullhound really supported me in saying like, “Hey, this is actually a pretty big trend. There’s gonna be some amazing companies built around this space,” and companies like RevenueCat, that are supporting CSS companies, are just as exciting.So, we’ve been slowly educating ourselves. The goal behind the report is really just to force me to do some thinking about the space. What it looks like. What it will be. As a banker, you can quickly focus on transaction, transaction, transaction, and not really do any long-term thinking about where the world’s going.It’s putting myself in your guys’s shoes. You guys are building RevenueCat not for what the world looks like today, but for what the world looks like in three to five years. I try to take the same approach with CSS, and think about where’s the world going to go. So I talked to a lot of smart people as I put the report together. Entrepreneurs, investors, get their opinions.You guys can see their interviews in the report, and then ultimately we publish it. The audience I like to think about is entrepreneurs, people that are thinking about starting a CSS company, or already launched one, and they’re looking to improve their metrics, or think about their target audience as entrepreneur-rich.By partnering with them, investing in their businesses, it takes them to the next level. The other way I like to think about it, it’s my own personal scoreboard. I love to flip back two years ago and see, was I right about this company? You’re publishing in public, so people can always come back to you and say, “Man, you were way off.” So, I look forward to that.00:03:26 Jacob:I remember the F finding the first one, the 2018, I guess, reporter 2019, whenever the first one you put out,00:03:33 Eric:2019, I think that’s how we met actually.00:03:36 Jacob:Did you reach out to me or? I think I found it, or I don’t remember what it was, but00:03:39 Eric:We’ve had a mutual friend, Nico introduced us and said, Hey, you guys should talk about this. and then I think we just went off on a two hour tangent.00:03:47 Jacob:But yeah, I remember being, it’s still, there’s still not a ton of like really focused research or writing on this space. and I think that, that, you know, this will probably won’t be true for very long, right. As long as it continues to grow, but like going back to like who it’s for. I mean, I imagine it as some, you know, end of the day, if you’re employing.Pushing into some kind of lead gen. Right. But it does provide a lot of value for, you know, even if you’re not interested in a transaction or whatever, just. Some like holistic data on a space. Cause like, I, the same, I mean, Eric, you said we’re, we’re thinking three and five years in the future. It’s like, I wish like a lot of times I’m thinking like three to six weeks in the future.Right. and so it’s even useful, I think, you know, even if you’re, you know, I, you know, we’re, we’re in a bit of an interesting place as a infrastructure provider to be at kind of a bird’s eye view, but it. Founder on one of these CSS apps, you know, like it is useful for you to know, like what’s the meta environment, how’s it evolving, you know?And if nothing else to like connect you with other people who have experimented with things and stuff like that. So, yeah, I think it provides beyond, beyond the, the, the lead gen aspect of it. It provides a lot of value for people. So I’m glad, I’m glad you’re, you’re still doing it. 00:05:04 Eric:Yeah. And just for any of the listeners, it is free. So you just go to the GP, bullhorn.com website. It’s all easy to download and then you can see all our past reports as well. So 00:05:12 David:Yeah, and we’ll drop it in the show notes. but, yeah. And, and, and speaking of all that, you know, it, it’s something we as RevenueCat want to get more into as well. I mean, just seeing how much value you’ve created in producing these reports, and we’re kind of sitting on a, you know, Processing over a billion dollars a year in, subscription revenue.We’ve got a lot of interesting data that, that we, that I’m very personally excited to share that we haven’t, kind of had the infrastructure to, to do yet, but are, are getting there. And, so hopefully we’ll, we’ll have our own kind of, state of subscriptions that dives into the data and some of the trends and stuff in a different way than, than your kind of, strategy and higher level look at things.But when one thing that has happened, in the actually. It was announced before your last report, but actually implemented since your last report. And that’s the app tracking transparency and iOS 14, which didn’t actually ship till iOS. What was it? 14.4 or five or something. So, so we’re kind of just now starting to see the impacts of it.And, and, you know, you took a couple of slides in your report to start discussing it. And it really is kind of one of the biggest topics and top of mind for subscription app developers, because it really is a huge shift in the landscape. So I want it to. Start with talking about that. And one of the things you shared in the, in the presentation is that you feel like it’s a short-term pain, that’s ultimately going to lead to a long-term gain.So I’d love to hear your thinking around what that pain is, but then also what you see the long-term game being.00:07:01 Eric:Yeah, it’s a, it’s a, great point. And, you know, anytime apple or Google make changes to their, their, their app stores, right. It’s a seismic shift throughout the industry because it’s something that impacts everyone. And so everyone has to be aware of these changes and then ultimately have a plan for them.And so I think that the change you’re talking about David is really the. The implementation of, removing tracking for a lot of, a lot of these businesses specifically, like. And so what the change did with IDFA, is it, it really deprecated the ability for, for marketers within some of these CSS businesses to really accurately target people, specifically using Facebook or some of these other social networks.And so what it’s doing is it. It’s impacting the conversion rates on, CSS, CSS, businesses, marketing to consumers. And so if you just can’t find that person that just is in love with, for example, biking, if you’re a Strava marketer, it just takes you a lot longer to find that specific subscribers you might have to market to 10 people now to find two subscribers versus before you can market to five people and find two subscribers.And so it just means marketing efficiencies going down. And that can mean. Growth rates. It can impact conversion rates and ultimately impact just financials of these businesses. And so it’s a pretty important consideration for any, CEO marketing team on how they go out and get their, their business in front of consumers.If Facebook’s no longer as efficient, they have to find other ways. And so. So my, my thought is like, this is a short-term problem, right? It’s something that’s going to take people two to three months to adapt and find a new way to reach consumers. But ultimately my hope is for the space is you see the long-term game, which is what I was referencing.People really focus on organic ways of acquiring customers. Right? So instead of just pumping ads through Facebook and trying to find someone who fits a profile, you spend a lot more time really narrowly targeting your demographic, your niche, and then finding ways for them to find your product organically either.You know? So like a company that I work with, we sold a company called Pinkbike and so what they do is they partner with, the trade associations for mountain. And those trails associations now act almost as the marketing partner of pink bike to let consumers know about the fact that all the trail details.Is on, is on the pink bike app or it’s called trail forks. And so that’s, that’s a really powerful, organic customer acquisition tool that they don’t have to pay for. And so you’re seeing, seeing the same thing happen with, like Strava is doing this, pre.com recently partnered with the NFL. So if your team’s got a last fourth quarter fuel goal and you need to get something kicked, you can go to pray.com and submit a prayer for your kicker. I wish I was joking. It’s a pretty brilliant idea. So I think this is really good for the sector overall, but yeah. Happy to dive into it. It’s it’s a fascinating00:09:37 Jacob:We it’s a callback to a sub club podcast content, but, Greg, this, the plant app, this is something that they were doing, which is like, we’re partnering with, plant nurseries. Yeah. To like, get their app into people’s hands. And, yeah, I don’t know if it’s an earned media or. Bought media, but this is more like this is earned, right?This is like building an audience. You’ve seen it in the maker community, actually a lot, like in the indie SaaS community, more it’s a different game when it has to be consumer scale. Right? Like there’s a little bit different. You have to build maybe a bit more than you would in like, oh, just blog about.Built this thing and that’s enough to get Indies, but you can apply the same thing, right? It’s like produce content, produce something like low investment for users to get engaged with your brand because you’re not building an app unless you have some, I mean, maybe you are, but you’re not going to build something with very high, like multiples.Like if you’re, if you don’t have something unique to offer in the first place, but put that into like a more like lightly consumable format, start to build that audience and then make that an on-ramp and yeah, I agree. Like that’s, that’s something you own, right? Like your brand is. your brand doesn’t exist on the app store, right?Like your brand can exist outside of these, like shifting sands and regulations and whatnot, and ultimately is like, you know, going to get reflected in your asset value if that’s something you care about. Right. So, 00:10:53 Eric:Yeah, that’s a key thing we talk about, right. If any business that we look at that’s potentially selling or, or thinking about raising capital, right? It’s like, how are you finding your. And if you’re, if you’re one channel is Facebook, and then consequently, like doing Facebook ads or apple ads on the, on the app store, that becomes pretty challenging.And so you want it to be such a good product, right? So it involves more work upfront. And just as you’re talking about Jacob, the product’s gotta be better. It’s gotta be more efficient. It’s got to reach consumers where they are with the problem they have. it becomes a lot more viral and a lot more sticky.So I think, I think it’s going to be good for the sector.00:11:26 David:You wouldn’t want to name names of course, but I am curious if. Had any clients, or just talks about anybody in the space where they were very reliant on Facebook specifically, and then, and have really struggled as things have changed. You know, I’ve been seeing some tweets around the, the consumer packaged goods space where some of these CPG companies are really struggling.And so I’m just curious. You know, without naming names, if, if there’s any kind of high level things you could share around, apps that have struggled in this new paradigm. 00:12:02 Eric:Yeah. I mean, I definitely can’t name names, you know, obviously I keep everything confidential with my clients, but even non-clients, you’ve seen CACs go up 20, 30%. you see, like, if you think about like conversion rates from installs to subs, That’s a big metric of actual intent. Did you find the right user, right?Did someone just click on it and download it? Great. But if they’re not actually subscribing that wasn’t a successful transaction for you. And so the way I think about this, David is it’s the app stores made tracking a lot harder, so it’s harder to find your right consumer. So imagine if you’re a CPG company, you walk into a grocery.And instead of stuff, being laid out perfectly across the shelves at the right height for you, they just tossed everything in the middle of the store and said, find what you want. Just go pick it out. Right. You’re going to have much lower conversion. You’re going to have much lower purchase rates because people aren’t being targeted with the stuff they want to see.And so I think now you have to find, you know, it becomes more of a specialty situation where you’re walking into a store that has stuff for just outdoor gear or very healthy granola. Right. And you’re going specifically to that store for that. That’s probably better in the long term, for a lot of these companies, 00:13:01 Jacob:Yeah, but there’s, there’s a lot of, there’s a lot of folks that have benefited from this ease relative ease, right. And any sort of market disruption is going to be painful. I was like, anecdotally, I mean, David, we’ve heard on this podcast and elsewhere people who have just like straight up pause acquisition, who are like all re scrambling because yeah.You get it tuned to this very fine knife edge. And I imagine for like consumer physical goods, like DDC stuff, it’s even worse because their margins are thinner than software. Right. 00:13:28 Eric:And you’ve got inventory and everything. Yeah. It’s a totally different. 00:13:31 Jacob:But, you know, as you do like you, the market reshuffles and the people, I can figure it out, the fastest are gonna are going to come out the best.So. 00:13:39 Eric:There’s going to be a shift though. So people under this is like that seismic shift that just shows how much of your reliance is on maybe one or two channels. Right? Two, two major tech companies sitting here in San Francisco. If you’re super, truly relying on those and you’re doing great, fine.But if a bump happens, right, how exposed are you? And so like, this will be a benefit. Right. I think it’s going to be a huge benefit for Tik TOK. Right? I think people are finding really good ways to acquire customers through tic-tac. And so that’s a very interesting channel. I think it’d be really good for influencers, right?If you have people that are very passionate about a certain space and then they go out and, you know, have a very core customer base that loves what they do specifically. It’s going to be pretty powerful for them to.00:14:18 David:Yeah, and I was just gonna say, anecdotally, you know, we haven’t done a super deep dive in our data, but at a, at a high level, I was. Bracing for our numbers to take a big dip. Like I, I mean, Jacob and I had talked about it in the spring about, you know, how, what is going to look like for RevenueCat, you know, are some of these subscription apps just going to completely unwind and people are apparently figuring it out because you know, it keeps going up until the right. 00:14:49 Jacob:I mean the consumer, the consumer need hasn’t disappeared. Right. So maybe if they just weren’t driven, you know, it’s not going to, it can’t just disappear overnight. Right? Like if you never, if you, if you are a Coke fan who never saw Coke out again, and it’s like, you’re still gonna buy it. Right. Like there’s, there’s, there’s a certain amount of demand.That’s just going to find the supply. But, but yeah, no, I mean, it’s hard for us to, to definitively say looking at our data and aggregators. Cause there’s so much, but they’re definitely. Like this summer was definitely slower than we’ve had in the past. Like on my, as I’m writing my investor updates of the year and each month and stuff looking at it.But yeah, it wasn’t like this catastrophic, you know, macro thing. And they were talking about a lot of like, you know, probably outliers that we hear about people who were affected, you know, more than others, but overall. I, I don’t think our, I don’t think our prediction last year of, of a potential recession was necessarily false.Like it doesn’t, it definitely doesn’t feel like it’s sped up the ecosystem. Right. But it doesn’t necessarily feel like a depression, right. Maybe, maybe a slight recession or just the normalization. 00:15:49 David:Looking at our data in aggregate that, some folks use this to their advantage and actually, and, and accelerated because they knew it was coming and they did focus more on product and organic and other things. And so for whatever, you know, losses, there were. Other folks more than made up for that.And that’s it kind of the interesting thing about working with so many, I mean, we’re closing in on 10,000 apps on revenue cat. And so, you know, you kind of have a pretty broad basket where you, you know, there are going to be winners and losers, but in aggregate subscription apps are just continuing to tick along and do really well. 00:16:26 Eric:David it’s like you read directly from bullets on my report. I, I, I completely agree with you.00:16:34 David:Another thing I wanted to dive into was the, the COVID bump. Cause that’s, that’s another thing that’s kind of been on everybody’s mind is simultaneous to this. I was 14 and, and this is something we’ve talked about again internally, with revenue cat, is it. This summer was the, everybody who was vaccinated and, and Delta hadn’t kind of bumped yet.And so, you know, may, June and July, there was a big shift socially. kind of it felt like it, especially in the U S that we were coming out of the pandemic. and, and so simultaneous to the app, tracking transparency, going into effect, we had these like societal shift. And then now we’re kind of back into it a little bit with the Delta surge, but just curious what your thoughts are on how much of the boosts we saw in 2020 really was dependent DEMEC and then how much of that will actually linger as kind of shifting consumer preferences and shifting consumer spend.00:17:36 Eric:Yeah. I mean, there’s, there’s absolutely a companies that benefited from us is called the removal of inf in in-person conversations. Right? So like Bumble and DuoLingo, two companies that both went public, right. They both benefited because their, their business model is designed around, not meeting in person for the first couple of conversations.Right. And so. There’s no way to say that they didn’t benefit. the way I think about it, though, in this, in the CSS space, it’s very similar to like the overall e-commerce space, right? Is consumers looked around to find a solution for a problem they’re having right. Instacart you couldn’t, you couldn’t go to the grocery store or maybe you felt less comfortable going to the grocery store.So you tried an Instacart for the first time. Maybe you were, you know, thinking about meeting someone, you know, long-term but you never, you never wanted to try online dating or you couldn’t go to the bar. So you tried online dating for the first time and sorry. What the pandemic did was it really opened up people’s eyes to other options from what they’d been doing for the last 20 years, 50 years, whatever it was.And so they had to find other solutions to, you know, their demands, their needs. And so I don’t, I think it’s absolutely a COVID bump, but I still look at it as really as an accelerant of people adopting new products and services that they would have tried in three to four years. but the pandemic kind of pushed them to try something, to move out of their comfort zone and try something new.So, you know, I absolutely think you’ll see a little bit of a downshift in, in some of these companies that had a really big boom, right? Like language learning. People had nothing to do for four to five months, especially over some of the winter times. So people tried new hobby, tried language learning, you know, that’ll probably go down a little bit, but overall, if you look at it from like a five-year trend, It’s going to be up substantially from where it was in 20 17, 20 18, 20 19, and 2020, you know, made it look like a little bit of bump, but eventually I think those companies will continue to grow and surpass what anything they did in 2020. 00:19:21 David:Yeah, that’s really interesting.00:19:22 Jacob:I’ll back that up as well with the, the unreleased, Jacob looks at graphs and then gives a, gives a hand wavy descriptions of them. But we, yeah, we, we were, I was kind of bracing for it as well. And then I would say this summer was slow and like, David was. We’re not sure why. I think it was, I think it was a number of factors things have since picked up again.But I think generally summers are slow for software a and then B. Yeah, I think we were seeing kind of like a little bit of the payback for, for COVID perhaps it’s a, it’s a vial. I think it’s a plausible theory. We don’t, it’s really hard to prove. but we have not seen, you know, we, we saw our COVID experience was really drastic.And we have not seen. Similar, like back off from that, like, it has been like, it has been like we just compressed six months and I’m saying partially, this is just revenue casts, individual story because of where we were last year. But then I think also it’s, it’s indicative of the system in general.It’s like, I think, yeah, we just compressed a whole bunch of, like consumer behavior change into like a very short period of time. And yeah, we’re not gonna be able to keep that up. Right. We’re not gonna be able to continue. To, to crunch that in, or we’ll run out of consumers eventually. But, but it doesn’t look like everybody’s, you know, because, you know, I think the story for CSS in general, it’s like we’ve delivered value for people, right?Like it’s, it’s a good, it’s a good product, right? The whole line, not every product is good, but in general it’s like a it’s, it’s a decent deal. And so I, I think more people discovering that. Yeah, it can only get bigger, right.00:20:55 Eric:Yeah, I think we talked about it in our first year, our first time together, right on the last podcast, which is if these businesses are truly making consumers’ lives better, this is going to be a very long-term.00:21:04 Jacob:Yeah. 00:21:05 David:And speaking of that, and the two companies you just mentioned, in the, Time since we last spoke, but Bumble and DuoLingo went public and some other consumer subscription, apps went public. so tell me a little bit about your, your perspective on the, the public investor. Excitement for CSS.I mean, we’re seeing pretty high multiples in the both of those IPS did, did very well. so what are you seeing in the, in the public investor space?00:21:33 Eric:Yeah, I think, I think the public market has really woken up to this business model, the power of it and understanding, you know, it’s public markets. They do a lot of pattern matching, right? If they’ve seen something be super successful, they look for something that looks similar to that. And so I think a lot of people are waking up to, how powerful Salesforce is not waking up.They’re well awake, very aware of SAS businesses. But I think they’re seeing that same pattern starts to take, hold on, CSS. It just has different metrics. Right? And so, you know, Bumble’s now public, the match group’s been public for quite some time. Once I spun out of IAC, you’ve got Netflix and Spotify, which are fantastic examples of the international global reach of Content, and how consumers are very sticky for something they love.And so. These businesses who can get to scale really quickly, like you nuMe, right, is a competitor to weight Watchers. Weight Watchers has been around for decades, but Newman built a better mouse trap and they acquired customers at a really quick rate. And, you know, they’re well over 400 million in revenue and ready for the public market.So I expect them to go public. Pretty soon. And so I think there’s going to be a lot of businesses that follow them that are using this, this metric. So, and then that’ll cascade all the way through, from public market investors as, as exit opportunities all the way down to, you know, series a series B investors, seeing this business model work and scale.00:22:47 Jacob:Yeah. I mean, I guess my, like, what’s your, like, I, I, when, when we started seeing these go public in the last, like couple of years, so, well, I mean, honestly, it’s like, Since we started RevenueCat, like was actually the, kind of the first unicorns, even like, I guess Bumble might’ve been passing unicorn when we got started, but like there weren’t a ton and now it’s like every, every month there’s a funding announcement for a CSS company.That’s a, that’s a university. I mean, partially that’s just like valuations going up and stuff like this, but like, how do you see. The evolution of this market. Long-term, you know, so DuoLingo pops becomes the first, you know, are they going to be like Salesforce and just be dominant in that space forever?Or do you see it being maybe more dynamic than sasses?00:23:31 Eric:I think it’s a little more dynamic than SAS for, for a couple of reasons. One, new consumers like to try stuff, right. And so if it’s with like a Salesforce or something, right. That integrates into your day to day operations from a business model perspective, right. So if something breaks there, right.Your business. 00:23:47 Jacob:Is very high. 00:23:48 Eric:Yeah, it’s a little higher, right. And it’s not just you using it. It’s your entire business. Right? So you’ve got 10 people using this product or 20 people or 5,000, depending on the size of your company. Right. In CSS. It’s it’s you, maybe you and your family. Right? So it’s a little bit of a different switching cost.So that’s, that’s one. However, these companies can scale a lot of. and they can, they don’t have like the heavy, heavy cost and, you know, on the sales and marketing side. So I think they have an ability to actually get to profitability a lot faster, especially if they have an organic customer acquisition engine.And so I think that’s going to be a big difference between that, between CSS and SAS. 00:24:23 Jacob:So, yeah, you mentioned the metrics are different. What are, what are the metrics that folks are, public investors are looking at for these companies that it might be different from a SAS company?00:24:33 Eric:Yeah. I mean, a lot of them are the same metrics, but the numbers that are like good are different, right? So like on a SAS business model, right. Revenue growth is just as attractive as a CSS business model revenue growth. Right. Everyone wants to see high double digits, triple digit numbers on revenue growth.But like an interesting thing is net revenue retention. Now that’s very different, right? In CSS, you typically don’t upcharge people or have additional seats be filled because it’s just one person. Right. So, you know, maybe you get an. 00:24:59 Jacob:It’s not much expansion opportunity. 00:25:00 Eric:Yeah, you can, you can do maybe some, some packages, upgrades, and people are starting to experiment that you can pack it and you can experiment with bump, bundling 00:25:07 Jacob:But it’s certainly never going to be greater. It’s never going to be net positive, right? 00:25:11 Eric:No, you’re never going to see a net positive number where a lot of the SAS businesses, right.People are looking for net revenue, retention, numbers of north of one, 20, 120% net revenue retention 00:25:18 Jacob:I mean the opposite of churn, right. Which if you have a CSS business with opposite, Congratulations. like 00:25:25 Eric:Yeah. You’re doing something well, and I haven’t found it yet, but yeah, 00:25:28 Jacob:You might be the only one 00:25:29 Eric:Yes, I think that’s right. 00:25:31 David:Quick, point though, to counterpoint to what y’all were both just saying, of all the apps, dating app, it’s totally slipping my mind. 00:25:40 Jacob:Tinder. partnership. David, look at us. We’re like on a wavelength. 00:25:46 David:They, they have in-app purchase. They have consumable in-app purchases to boost your, profile. They’re one of the few that I’ve seen that could potentially actually have a. A a positive, net revenue retention. whereas most subscription apps are just a subscription. it’s going to be interesting to see if other subscription apps can pull off that sort of model that you could actually generate a, a net net revenue retention. 00:26:19 Eric:I think you nailed it, David. So that’s coming from. Right. I think people first experimented with, Hey, how do I get someone to buy my product every year or every month? Right. And now is how do you make it even better? So they’re starting to listen to their core users. And we talk about this a little bit on the LTVs.And what do these people want and what makes this experience even better for them. And I think you nailed it with Tinder, right? It’s the most, it’s the easiest thing to convince people to, to encourage more is more, you know, more relationships, right? People love more relationships and people are willing to pay for that.And so, you know, then what else, what else could this go down the path of, right. What other options could people pay for additional services? Or what we’ve seen is like marketplaces or transactions spinning on. Right. So if you have a really passionate user base and they’re going out there doing, camping, for example, like on, on the dirt, it’s a camping site, right?What about doing a marketplace to buy and sell use tents right now is not a subscription, but now if someone’s paying, like, okay, now they bought something through your marketplace and you get 10% of that purchase price. So there’s going to be a lot of stuff. I think that happens there, to encourage that, to encourage that LTV numbers start rising, I just haven’t seen a ton yet, make it happen above 00:27:26 Jacob:It’s a scale problem. I need to do that either be at such scale for that to make sense. So I was going to say for anybody, listening to this, that hasn’t reached 20 million in ARR, probably north of that do not add a marketplace to your 00:27:37 Eric:I totally agree with that. Very, very much focused focus, focus. And so I would even say like closer to 50 00:27:43 Jacob:Yeah. I mean, until you’re like, how do we get this thing public? Or how do we show, like, how do we show like N plus one revenue streams, right? Like it’s kinda more what it’s about than it is necessarily the revenue generated. 00:27:53 Eric:I’m just a dreamer though. You’re just a realist. I’m here, I’m here. And you’re just telling me all that stuff that could go wrong. 00:27:58 David:One of the things you just kinda touched on that I wanted to dive deeper into was, was a truth about LTVs. And I love this slide on the, on your presentation, kind of defining these two cohorts, which I’ve never heard, defined this way. And I really loved the analogy and I’m going to start sort of stealing it from you and use.And crediting you of course. but in the presentation you define, tourists and locals, and then talk about kind of the importance of identifying these different cohorts. So tell me about Who the locals are and why that matters and who the tourists are and how companies can start, analyzing their data to understand this and better target marketing, better, craft the experience in the app and, and those sorts of things. 00:28:46 Eric:Yeah. So we’re going to geek out here guys, and, really go deep into STSS. Right? So this is where, this is where my brain goes sometimes on a Saturday night, which is just exciting. but so the way I’ve been thinking about CSS a lot, and so the LTV component of CSS, which is lifetime value, Which I’m sure all your listeners are very, very well aware of is kind of like how much money can you make from this consumer over time.Right. And it’s a function of your pricing and it’s an, a function of your turn rate. And so, a lot of people are very focused on this metric as investors or buyers, right? Because it’s effectively, how valuable is your customer? So it’s an extremely important metric. The problem with this metric and lots of other metrics is it’s, it’s derived from an app.Right. It’s looking at all your users that come into your, in your ecosystem is paying customers. And then how do they perform over time? and it’s, it’s driven, it’s driven off an average of all your users. And so when I’ve gone through some of my client’s data and you look at their user base, right, we, we quickly discovered there’s a, there’s kind of two different profiles.And I won’t use any names here, but let’s just, let’s just say it’s, a walking company, right? So you’re, you’ve got people that go out and they, they sign up, you have a hundred people that. And 20 of them start walking every day and they’re, and they, this is what they love and they’re tracking, they’re walking and you’ve got another 40 that do it for like a month or two.And then they kind of drop off and then just like, I’m going to go do biking or skateboarding or something. And I switch and you’ve got another people that sign up. They subscribed to it because their friend pressured him into it and they hate walking and they’re never going to walk again and they turn off immediately.Right. So you kind of have those three different groups, some that are just going to do whatever. Some that do it for two to three months and then leave. And then some that do it the first month. And then say, forget this. I’m never going to use this again. And so the problem is your LTV of each one of those three groups are very, very different.And so what, we’ve, what we’ve been guiding investors and entrepreneurs, as they think about their growing their businesses, really find out who those locals are, who those people that are going to come and use your app every day, every week, every summer, whatever, whatever the metric is that you’re looking.And find ways to measure that, right? Because ultimately that’s who you need to bring to your community. And one, those people make the community run more robust, right? Cause they’re constantly contributing feedback into the. To, they’re much more likely to stay around with you guys. And so you need to find those tools that they’re looking for.Right? Like seeing around the corner and saying like, okay, this person loves walking. What else can I provide them? What about a weather forecast? So now that they are about to go out and walking, you know, what does the weather look like? And, oh my God, this is now, this is my one-stop stop for, for walking.And so I think w we’ve been guidinGP Bullhound’s like if you use the averages as a broad metric and that’s great, and you should, because investors are going to want to know that, but, but really dig deep into your, your cohort and understand like who’s using this every day, all day and what do they need. And so if you can really identify that and show that LTV to, to invest in.I think you can get people a lot more excited than just like that average LTV, right? Cause this shows them potential of what it can be over three to five years, which is really important if you’re two or three year old company. Right. And try to convince someone to invest in you showing them that lifetime value of the tour or the locals is going to be a lot more valuable than that average.00:31:46 Jacob:I mean, if you think about just as the, you know, I think it’s one of the, you highlighted one of the hard parts of assessing these businesses early on, is that yeah. Your cohort, your total subscriber base is very heavily biased on like your most recent cohort, because often you’re also growing, right?Like that’s often, like your most recent cohort might be the size of your first five, you know? just because, and for that reason you can really have scurry looking data. but you know, if you think five years from now, mostly. Those other two groups you mentioned there they’ll have turned out from most cohorts.Right? And then the only ones remaining for four years of cohorts will be these locals and these long-term retention. And then your total subscriber base is gonna look very different than it does today. Right. And yeah, I’ll admit revenue. I’ve tried to solve this problem in the product. And we still are trying to solve this problem in the product.It’s how do we like show people? Cause you’re, you’re dealing with a mixed population, right? And like you, you can also also run into a problem with begging the COO or like doing very, like, look, you got to invest in and say like, look, look how great my retention is. If I just ignore them. Bad users. Right?Like, let me just look at the good ones. Right. But there is something there in that. What you’re talking about, Eric, that long, that very long-term view is that if these users really do retain for a long time, eventually they will be the lion’s share of. Subscriber base. And that churn that we talk about, like, you know, if you’re adding 1% of your total user base, the most you can experience off of that as like 1% of churn, right.Versus when you’re adding half, you know, if you have 110,000 subscribers and you add 10,000 in a month, that’s going to be a huge effect to your overall subscription subscription base. Right. so yeah, I think, I think, you know, we certainly have a lot to build on the tooling side. Right. And I think it goes to what you’re talking about.Air. We’re very early. Like, I think we’ve just kind of solved infrastructure, like infrastructure. I mean, I would even say kind of, cause there’s a lot for us that we need to do yet. but as far as like data science and actually yeah. Being able to outside of a spreadsheet, understand this stuff. It’s it’s, it’s not trivial.It’s not trivial. All 00:33:51 Eric:It’s extremely hard. And I think like, cause there’s so much more you could do once you’ve broken those two cohorts into tourists and locals, right? Like how do you acquire the locals versus how do you acquire the tourists? Are tourists coming through like Facebook, apple store and the locals are coming from referrals.Okay. So maybe your Facebook spend, is that even worth doing the spending on right. If they’re, if they’re turning off after a month or two, you know, subscribers is a vanity metric, right. If they don’t. All right. You can grow. We talked about this in our 2020 report. We have like this cheetah versus thoroughbred.Right. And it’s really easy to show a ton of growth. And you’ve got all these subscribers and everything is fantastic. Right. But if those subscribers get tired and they turn off right away, you kind of probably wasted money on them. Right. Maybe you got paid back in a month, right. So you didn’t lose like on the CAC spend right in here, but you’re not building your business.Right. You’re just gonna you’re pinching pennies. 00:34:36 Jacob:But not a lot of work. Right? Like it’s not actually getting translated into business 00:34:39 Eric:Exactly. So is it better to kind of focus on the product, right? Figure out what those, those, tourists are using and spend less time on the marketing side and really nailed the products like, Hey, you’ll probably grow slower, right? And That’s an issue. That’s a risk you have to take, but maybe you can grow more efficiently, more capital efficiency.00:34:55 Jacob:Capital’s free now, so that’s not a 00:34:58 Eric:That’s a fair point of half my fault, I’ll take full responsibility for some of that. Right. 00:35:03 Jacob:I think it’s interesting how this like feeds into, you know, kind of going back to targeting and ad targeting how often. Optimized Facebook campaigns on like trial conversion. And that doesn’t even that doesn’t, that’s all your tourists and your locals. I mean, maybe some of those that never even start a trial would be cause, but there’s a lot of tourists in that group that started trial right.Or convert a trial. And a lot of people are targeting off of that. Right. And so as these methods become less. Good. it will force it’ll force developers to yeah. Maybe do one of these scary things actually talk to users, right? Like actually like find those locals, like go in your analytics. And I think just the thing as you were talking about, I just want to point out that, like, I don’t think you necessarily need to define this off of monetization retention either could just be retention, like pure usage retention, but it could also be engagement.Yeah. I think about the way Facebook, Oriented their growth teams very early on, which was like findinGP Bullhound that connected, like that was a really key step for them in their product, was to get people to make like three or four. I forget there’s some number of friends and they oriented all of their growth efforts around that.Find the thing that people do in your. Shows that they’re engaged and give them opportunities to show that. And then, you know, you can use that as an indicator. Okay. Talk to those folks and actually talk to them, right? Like find out, always put something in your app that lets you reach out to them in some way.And like, have you can get on a zoom call. I’ve done. It’s easier now in SaaS land because like, I, I, I, people I’m an app. People like I know how to talk to them, but when we were, when I was working in consumer. Phone calls were more awkward, right? It was different. You’re not going to books like outside of computer land, but still like just incredibly valuable.And, and, and, and I think like, you know, if we want to talk about the way to build the way to fully realize how CSS is going to, I’m just going to go all in on your turmeric, by the way, I said, I’m going to, 00:36:57 Eric:That.00:36:57 Jacob:I’m going to push it. We’re going to standardize. But 00:36:59 Eric:It’s not trademark, but knock it out. 00:37:01 Jacob:All right. So to fully like, to fully realize the potential to like help problems for people.Like, I think we need to lean into this more of this model. Right. Rather than I’ve always kind of like had an uncomfortable relationship with how our RevenueCat fits into the like hyper fast monetization stuff. Right. I’m like, get users, check your CAC, put more money into Facebook. Right. And so, the more the industry gets away from that. The happier I am. I don’t know. Like you said, maybe it doesn’t go quite as fast, but I think the overall Tam will be larger. Right? If we take that approach,00:37:33 Eric:Think that’s right. And, you know, I mean, I’ve talked to a bunch of founders that haven’t raised capital. Right. And they build something that like their users love. Right. Like, so I don’t know if you guys saw the deal with day one that got bought by automatic braised almost as your outside capital.Right. He built. 00:37:46 Jacob:Big fans that they won. 00:37:47 Eric:Yeah. Yeah. I was a big,I got it’s an awesome business and he did that exact same thing. Right. He just listened to his users. He didn’t care about vanity metrics grew really nicely. Right. And it wasn’t like, you know, he’s not getting tech crunch publishing, but that’s fine. Right. You know, on an amazing business.And then, you know, I’ve got a fantastic exit out of it. So I think, I think people are really waking up to that’s a very much a possibility here in the.00:38:08 David:Yeah, one thing I wanted to highlight too, in that graph that you made, and for people that are listening to this, you can go to the show notes. We’ll have links to the, Eric’s presentation and you can find this chart, but to visualize it00:38:25 Jacob:Page 18. it open right here. 00:38:27 David:Following along at home, the, line for the locals drops.So, you know, even, even for locals, you’re going to have some turn early on, but then it essentially flat lines. and I’m sure you did that very purposely to kind of illustrate how. How long term some of these, these, this retention can end up being, and it’s something we’ve actually been talking on the podcast about recently is that we’re so early in the space.We don’t even really know what, how to measure LTV. Cause you’re going to have people who ended up subscribing for decades. and years and years and years, if not decades. And so, and, and then, you know, to your point about the cheetah versus thoroughbred, another great chart in the patient number, Jacob Page number00:39:16 Jacob:I 00:39:17 David:Cheetah versus thoroughbred but in that tuna versus thoroughbred, The other aspect to locals, and we’re kind of touched on it earlier is that those cohorts start to stack. So when you identify this cohort, that is going to be a very long-term cohort. That’s going to stay subscribed and have very low churn. You, you acquire a hundred thousand this year, and then they’re still there next year.And you put a hundred thousand on top of that. And those are still there next year. And by year three, you know, you just continue to grow this pie of people who are very, very sticky in the product. And I think that’s part of what. you know, what you’re talking about with delinquent and Bumble and other companies is like, we’re still just starting to understand even as different as this is from SaaS.We’re starting to see similar dynamics as far as. Early on the churn is so high, but then you do have this really strong stickiness over the long-term that, that, that can build a really healthy business of people who really love your, your product and really are invested in it and are going to stay for a really long time.So yeah, I just wanted to point that out that, that I, I love that aspect of the chart of how flat that line is for the locals. 00:40:35 Eric:I mean, you, you can see it in your own spending patterns, right? Like how many of you guys have subscribed to Netflix or Spotify for more than five years? I bet it’s a good chunk of your listeners. Right? So, I mean, if I look at my phone, right, I’m going to subscribe to all trails for the next decade, 00:40:47 Jacob:Yeah, I’ve got CSS. I I’ve started subscribing to in 20 13, 14, like as 00:40:52 Eric:Yeah. 00:40:52 Jacob:It was a thing, 00:40:53 Eric:I’ve, been a script user for four years and I still download audio books or download other books from like the San Francisco library. Cause I’m probably the cheapest banker of all time. but you know, I still use script 00:41:04 Jacob:It’s finding margin, Eric you’re finding margin. That’s what that is. 00:41:07 Eric:Exactly. I’ve pinched counties all day.But yeah, so I mean, I, I think those tails David to your point are still being written. And so that’s the whole point, right? If you use average LTV and you say, all right, well, we have 30% churn that math means you lose every user in three years, and that’s just not how it works. And if with really good businesses that are delivering value, right?And so then once you convince people of that, right, the investment case becomes a very different company.00:41:30 David:And speaking of that, you, you had a great, slide on investor benchmarks. And so I wanted to get to that real quick, tell me about how you, how you thought. These different metrics. And what, and how investors think about these metrics? Because you know, we’re talking about LTV and in there you have LTV to CAC of you, you know, for a really strong app, that investor would be super excited about.You’re closest to. Six X versus less than three X, you start to cool off. So, yeah. Walk us through each of these metrics and kind of how you think about it, how you think investors think about it, And even how that’s kind of maturing as we understand the space better. 00:42:10 Eric:Yeah. And just to note like these metrics are all different for different types of businesses, right? If you’ve been around for a year, these metrics are very different versus if you’ve been around for 10 years, right. If you’re in high growth, you know, venture back, spending a lot of money, these metrics look very different than if you’re a bootstrap business, you know, just trying to inch out.You know, 10% growth a year. Right. So they can be very different. And the important thing is how does the story of your business and what you’re trying to accomplish tie to these metrics? Right. So that’s what we spent a lot of time talking to founders about is, is what’s good based on what you’re trying to do.Right. So it’s just how you, how do you tell your story through the metrics? but yeah, so a couple of your points on the S on the slide, we talk about like user growth rates, gross margins, LTV to CAC, churn rates, free to paid conversion rate, and then sales efficiency. and then, you know, just to talk about something different, we, we talked about LTV a little bit earlier, but maybe talking about, churn, right.And so like how quickly do people churn off? Right. And so that’s, there’s a couple different ways to interpret churn, right? It’s one, they didn’t find your product. Too. They thought it was really expensive. or if they’re not turning, they really love something you’ve put together. Right. And they decided to pay you multiple times for that either monthly or annual.And so what we just try to do is try to tell the story of where the business is at and where it’s going by looking at these metrics. And so, you know, that’s why it’s so important to truly understand these metrics, because if you don’t understand the metrics, it’s hard to tie that to the story. so we spent a lot of time with any client or even non-clients just talking about this stuff to truly understand, you know, what investors care about.And it’s, you know, if someone’s buying the business, they may care a very good. They may care about very different metrics for someone who’s investing your business for growth, right? So someone’s going to put 40%, $40 million on your balance sheet to go grow. They may be focused less on LTV to CAC now because your LTV is not formally formed, right.They don’t know how good it is, but they will focus very heavily on churn, which is a reflection of how good your product is and how good you’re finding consumers that love your product. Right. So those, those are metrics that they may focus. They made me more comfortable spending a lot of money in the next two years.Right. So your CACs going to look a lot worse because they watched, you acquire a lot of users to make the platform a lot better. Right. And a lot of CSS businesses, right. UGC is a, is a, is a spinoff of user activity on the post. Beautiful uploading photos reviews. They’re adding new new items on, on the platform for other users to use.And so it’s worth spending more money to get those people in the first two to three years because your platform becomes that much better and that much more valuable, right? So you may be willing to burn down to a, an LTV to CAC of three X or something like that in the near term, or sometimes even two extra one X, because it’s a land grab for those.Once you’re on their platform right now. You want to see that LTV to CAC, start to move up a little bit, right? So you start to put it to four or five, six X, LTV to CAC. So it’s all about where your business is. It’s each different stage, but it’s important to have a story and a message around why your numbers are, what they are.00:45:03 Jacob:Of the, I have the slides up in third slide, 37 for anybody who’s following along at home. all of these as a veteran SAS CSS person, every annual user growth rate, gross margin to be cash I’ll clear me, sales efficiency ratio. Can you talk about that one? Cause that one’s, that one’s, not as a little foreign to me. 00:45:22 Eric:Yeah. It’s, it’s a, it’s more of a metric that’s come out of SAS just to be honest. So it’s thinking about like, it involves like how, how many users are you gaining? It’s how much revenue you’re gaining versus how much money are you putting out there? So it’s a little bit of a different metric. and most CSS businesses don’t get to that yet because they typically don’t have heavy sales team.And so we’ve included it because you’re starting to see some of these CSS businesses really start to grow. And so how much revenue gaining versus how much revenue you’re losing and how much is it costing you to do that? And so that’s when you’re starting to get into like the tens to $20 million of, of, marketing spend a year, it’s, it’s, important to understand like how efficient is that spend being, and this is the best metric 00:46:00 Jacob:We, it says called sales, but you actually throw in marketing, spend in there as well. So it’s like all go to market spend 00:46:07 Eric:Yeah. Are using head count, not just like the ad dollars. right. 00:46:10 Jacob:Right. 00:46:11 Eric:It’s like a fully loaded CAC number, like 00:46:13 Jacob:Your, all of your people telling Facebook what to do, 00:46:17 Eric:Yep, exactly. Exactly. 00:46:18 Jacob:Content graders, like all that stuff, right? Yeah. 00:46:20 Eric:If you’ve got a hundred people running around campus, right. Promoting your app. Right. Okay. How much those people cost. Right. So it’s an important way to think about how much you grow. And it’s a way to think about like how well can you grow a capitally efficient capital with limited amounts of capital.So it’s an important one. We look at it, it’s typically a later stage, right? So you’ve gotta be like north of 20 million of 00:46:40 Jacob:So he’s going to be super high when you’re small, right? Because you’re, you’re your. 00:46:43 Eric:Sir. Request important. 00:46:44 Jacob:People are discreet. Right. And that you can’t, you’re not continuous. So, and also your, your, your revenue just grows less because of like, you know, you’re smaller, you’re less, well-known like, you’re less is momentum is things like this. 00:46:56 David:Well, we’re starting to run low on time, but there’s so much more I want to talk to you about, but just to hit one last thing. I also love this chart you did, of Pandora versus Spotify. It’s such a. And encapsulation, really everything that we’ve been talking about on this podcast is to see how well Spotify revenue has compounded over the past few years versus a Pandora, which, which look was the juggernaut.You know, when, when, when Spotify started. so, so walk us through this chart. And in how and why you think, you know, Spotify was able to, to grow the way they did while Pandora really struggled. And obviously there’s a ton of, you know, other business factors and execution and other things. But, but I think overall, this does speak to the power of CSS.00:47:54 Eric:Yeah. And this is, this is something we did back in 2020 when we were just trying to decide like, Hey, what’s is this CSS thing real? And, and a big question you get from, from investors. And listen, I think a lot of them have stopped asking this question because the case studies are out there is why would someone pay monthly or annually for something they can get for free?And by get for free, it means listening to, or watch. Right. And so I wanted to see like, alright, graphically or like actually numbers to will people, more companies make more money by making that really hard decision and say, pay me for what I’m giving you first. I’ll give you something for free and exchange every half hour, you watch two minutes of ads, right?That’s a really hard question to say, because it involves you putting a lot of value in your product. And so entrepreneurs, you know, product developers have to. Is this worth money or am I giving something out to people that, Hey, they’ll kind of use it if they get it for free. Right? So it’s a, it’s a gut check for people to say, like, did I build something that someone will buy?That’s hard. That’s really challenging. Ask yourself, especially if you’ve started with advertising. and Spotify, you know, listen, they were a small company based in the Nordics, right. Versus Pandora US-based juggernaut and, and raised a lot of money. Right. That’s a tough challenge. And so they took a really tough thing and said like, Hey, we’re going to get.And make people pay for our product and we’re going to make it better. But the crazy thing that happens though, right, is you make so much more on a user from subscriptions than you do from average. Right on advertising. You’re trying to pick up pennies per subscription on some or pennies per user on the subscriber.You’re making 10, 20 bucks a month, depending maybe maybe $60 a year for a subscriber. So the amount of users you have compounds so quickly, and then if you have that heavy retention, all of a sudden, you’ve got these really thick layers of cashflow that come in every year, use that cashflow. You invest it back in.He invested back in product and you do it again and again and again, and all of a sudden you’ve got a better product. And if you have a better product, people will come to it. And if it’s something that they’re using daily, right. Why would you not be comfortable like paying five bucks? Right. If I think about like how much my Netflix subscription is, right.It’s $11 a month or something like that. Right. Well, I probably watch 10 hours of Netflix a month, right? So I’m paying a dollar an hour to be entertained. Pretty good deal. And so, like, I think if people, people start doing that math and you start to see like how powerful that that subscription is for user versus an ad driven, it becomes pretty interesting.And so I think you’ve seen this case study play out over and over and over across CSS, where if you build a good enough product, you know, a 10 X product versus the free option, people will pay for it. 00:50:24 David:And Spotify does double dip as well, which is interesting is that they have a good enough free tier and people can listen for free. But they choose to spend, even though they can. And so, so Spotify is a great example of, of double-dipping with a great freemium tier, but then a good enough product in a compelling enough reason that people will pay.00:50:47 Jacob:Yeah, another dimension. I don’t know the specifics of Pandora and Spotify. It’s like fundraising history, but if you have like the subscriber. Subscription revenue momentum makes capital more easy to access. And you look at some of this. I think of some of the strategic stuff that Spotify has done. Like they got the Beatles on Spotify pretty early on and lets up, they spent big on partnerships and Content and stuff.And if you have momentum, if you have hard dollars, it’s a lot easier to go to an investor and be like, Hey, like I want to raise X million dollar. Revenue growth. I have, like, this is very clearly a business. I can remember raising money in the pre revenue is everything era or like trying to raise money.And it was like a lot harder. Right. Cause it was just like hand waves and we’re going to grow and like, and now it’s like, yeah, for better or worse, you go over the curtain and you show something. Right. But the big benefit too, I think for founders, it’s not just for investor, for founders. It’s like, yeah, you build a great business.You’re building a safety net, right? Like if you can’t fundraise, it’s not the end of the world. Like you have options. And I think that’s part of the reason why also, I mean, now we’re getting into fundraising like macro, but that’s part of the reason the funding environment is crazy because businesses are sturdier than they’ve ever been.Like they need capital less than they’ve ever needed it. Right. And so like, that’s why it’s gotten cheaper. or, you know, evaluation’s gotten higher same thing. Right. So, Anyway. Yeah. And this is a fascinating to put this. I already was not on here, which was my horse. And I was like really pulling for them.And then it gets to a whole different story of why that’s not on there. But, but yeah, it’s fascinating.00:52:11 David:Well, I think that’s a really fun place to end the story of Spotify, one of the biggest juggernauts in the space. We’re going to include in the show notes a link to the report, a link to your LinkedIn and Twitter to follow along.Anything else you want to share as we wrap up? 00:52:27 Eric:No guys. Always a pleasure to join you. One thing for your audience users, we are trying to make the GP Bullhound CSS report a resource for founders. This year, for the first time ever, we did include a link to a survey.So, if you want to contribute your data, what we’ll do is aggregate everything, anonymize it, and then we’ll provide back a summary to users to say, “Hey, here’s your LTV to CAC. How does this compare to other founders at this stage?” We are trying to be a resource. I’ll probably give you guys that link, if you don’t mind. We’d love to have as many people as possible. No pressure.Of course, all of it would be anonymized. This isn’t a marketing tactic for us. It’s us giving back to the community. We’d love people to take a second to do the survey, but if not, don’t hesitate to email me, tweet at me, hit me on LinkedIn with questions, comments, and specifically stuff We got wrong. Absolutely love to hear where we can learn.00:53:22 Jacob:Yeah. 00:53:23 Eric:Because we’re not building, we’re just talking about what you guys are doing.00:53:26 Jacob:By the time you print this thing, it’s like, stuff’s changed, right? Like it’s changing so fast.00:53:32 Eric:The whole Apple thing when we were publishing was happening everyday. And I was like, this is unbelievable.00:53:36 Jacob:And wait to...00:53:36 Eric:Since July, and I have to change every minute. Yeah. I had to change a PowerPoint. You guys had to change code. So I think one was a lot harder.00:53:44 David:Well, it was great having you on, Eric, and we’ll have to make this an annual thing.00:53:49 Eric:Sounds good.You’re welcome.00:53:51 Jacob:Yeah, we’ll see you next year. 00:53:52 David:See you in 2022.00:53:54 Eric:All right. Thanks David. Thanks Jacob.
  • Sub Club podcast

    From Bootstrapping to Partnering With Sony — Seth Miller, Rapchat

    45:58

    Our guest today is Seth Miller, Founder and CEO at Rapchat. Seth is on a mission to democratize music creation with Rapchat’s mobile app. Rapchat takes the friction out of making music, and has helped millions of artists unleash their creativity.Seth earned his bachelor’s degree in business administration, with an emphasis on management information systems, from Ohio University. Before founding Rapchat, Seth worked as a consultant for Adidas, and an IT Systems Engineer.On the podcast we talk with Seth about bootstrapping his way to signs of product market fit, raising money from strategic partners like Sony Music, and what it’s like to have Facebook completely rip off your app.In this episode, you’ll learn: Finding the right niche for your app Bootstrapping and early funding Using the right marketing channels for your app Filtering out the wrong users for your app's paid features How to transition your app from free to paid Links & Resources Sony Nico Wittenborn Twitter Adjacent Complex Seth Miller’s Links Follow Seth on Twitter Rapchat Follow us on Twitter: David Barnard Jacob Eiting RevenueCat Sub Club Episode Transcript00:00:00 Seth:We would be dead for sure if I didn’t learn how to code. It’s an invaluable skill that I’ll have in this organization and future organizations. It also just helps me think about things. It’s a really great way to look at the world sometimes.00:00:31 David:Hello, I’m your host, David Bernard. And with me as always, RevenueCat CEO, Jacob Eiting. Our guest today is Seth Miller, founder and CEO at Rapchat. Seth is on a mission to democratize music creation with Rapchat’s mobile app. It takes the friction out of making music, and has helped millions of artists unleash their creativity on the podcast.We talk with Seth about bootstrapping his way to signs of product market fit. Raising money from strategic partners like Sony, and what it’s like to have Facebook completely rip off your app.Hey Seth, welcome to the podcast!00:01:06 Seth:How’s it going? Thanks for having me.00:01:07 David:It’s been a long time coming. You and I first chatted way back in 2019. You were the first office hour call I ever took at RevenueCat.00:01:18 Seth:Oh, wow. 00:01:19 David:Yeah, going way back in my RevenueCat days. 00:01:22 Jacob:It tells you how bad of a CEO I am that we’ve never actually spoken on the phone in those two years.00:01:30 Seth:Or how good David was!00:01:31 Jacob:Yeah.00:01:32 Seth:I was sold after one call. I’m like, all right, dude, where do I sign up? How do I get this going? 00:01:37 Jacob:We have a lot of cross connections, because you’re an Adjacent portfolio. Nico is a co-investor. We’re also both Ohio-based. So, yeah, lots of cover today.00:01:54 Seth:We got to hang out. 00:01:55 Jacob:We should. It’s beautiful in Ohio today, but I’m not going to make an Ohio podcast.But, maybe kickoff and tell us, what is Rapchat?00:02:07 Seth:Yeah, absolutely. So, Rapchat is the easiest way to make music on your phone. We have an iOS and Android app. You really just like tap in, and open the app. We have hundreds and thousands of free beats on the app. So, you just pick a beat, you can record over it, and then you can share that anywhere.We have people making full-length studio-quality songs from their phone and sharing it to Instagram and SoundCloud. And then also on the platform, we have a social layer as well. Which is really cool. Pretty much a recording studio in your pocket, with a community, with a social layer.Similar to Visco, or Instagram for music. Our mission is really to democratize music by providing access and tools to the next billion music creators.00:03:01 Jacob:How did you get on this idea?00:03:05 Seth:Well, like just scratching my own itch in the early days. Almost eight years ago when I was in college, apps were really starting to become a thing, and same with social networks and you-do-see platforms that let you create content and share it. You know, the golden era of Vine, Snap, all of that. But there was nothing for music.I also had a hobby of freestyling with my friends. So, we’d get together, throw on beats, and rap, and some people would sing and just create all sorts of stuff. It was something that I noticed that was like, yeah, this should exist on your phone. I should be able to do this with my high school buddies that are on a different campus that I used to do it with.That was really it, just scratching my own itch. Then over time, I think we’ve really come to realize that there’s just this massive opportunity to do this at scale for those that really want to make music and take it seriously.So, I’ve kind of outgrown my own use case a little bit, even though we have people that come and have fun, but really we’re focused on providing tools for the everyday artist that historically has been kind of gatekeeped out of participating in music. So, we try and give them everything we can in their pocket, and still feels like we’re only getting started. 00:04:26 Jacob:It’s not as easy to pirate logic these days I imagine, like it used to be.00:04:31 Seth:Yeah. Right.00:04:32 David:What did those early days look like? Did you learn to code? Did you have a coding background? What did those early days look like, and when did you get the app out? 00:04:43 Seth:Yeah, I mean, pure chaos and it’s not too much different today, you know, it’s just a little more organized. yeah, the first version of the iOS app was June, 2014. I think it was June 7th and that was really. I wouldn’t even pass as an alpha version think especially with how good some of the test flights are, but, you know, it was very basic.It was, you could open the app record one track over like 10 predefined beats that had to come with the app store bundle, like would even have server side, like beats, and. Like, we just wanted to test that people would do it. And you know, of course the first couple of months, is just getting friends off Facebook and family to download it.But then, I started to notice like, you know, a little bit of traction and then more traction and then basically quit my job. I was like, all right, I gotta, I gotta really go after this. And it, that exactly. That’s when I taught myself how to code too, because, I had a lot of help in the early days, just from like friends, faculty members, anyone I could get to work on it But then after, you know, I noticed there’s just like basically early signs of product market fit, I guess, if you will now, but people sharing it. I was like, I really want to make updates to this thing and I can’t afford any engineers and I don’t know anything about fundraising. So it was like the only way I could make any updates and then wrote really shitty code for like three years.And, but got enough traction improved to kind of, you know, enter the startup space, the fundraising space. Now, luckily we have really amazing engineers and I still write some code here and there. That’s probably not that great, but, you know, I love it. So,00:06:22 David:Did you have any co-founders? 00:06:24 Seth:Yeah, so we, I mean, we had a team on campus in the early days, that, you know, we’re helping out. We’ve had a lot of people along the way, help out in different parts of the journey it’s been. An epic journey, you know, and, lots of ups and downs, but yeah, we’ve had lots of different people help us out.And, now we have a fully distributed team, and still relatively small 10 people, but, lots of great product builders and, yeah, it’s a lot of fun00:06:54 Jacob:Yeah. David can, can probably talk more to the pain of not like having on staff. Like it’s not so much. I mean, yeah. I mean, the cost is a thing for sure. But like, I think a bigger thing often is the, the, the turnaround time, right? The iteration time of not having well, you know, even if you’re. You know, product person who’s non-technical and you have a technical co-founder, there’s even like friction there and communicating the ideas.Right. If you’re not really in sync. And so having that all in one mind can really like speed things up. And in the early days, that’s what it’s all about. Right? It’s all about iteration speed. It’s all about getting, you know, different sticking stuff, different stuff to the wall. As fast as possible to see what takes off.So, that’s always the advice saying, I don’t know if there’s anybody that listen, this is there, there probably are people in the podcast in a similar situation where they’re like, maybe they didn’t study programming or whatever. Like it’s gotta be, I mean, I don’t know so that you can, you can go against this.Maybe it’s not the case, but it feels like it’s probably the best way to invest your time is like, get to the basics, like as fast as you can.00:07:59 Seth:Yeah, I think so. I mean, the amount of time you’ll spend trying to like find a co-founder that codes. Sure. The ultimate is like, you find a co-founder you guys gel and like, they know how to code and you know, you know how to do everything else, but like, I dunno, we would be dead for sure. If I didn’t learn how to code and it’s an invaluable skill that I’ll have in this organization and future organizations, it also just helps me like, think about things like it’s a really great, like, you know, way to look at the world sometimes.00:08:32 Jacob:Yeah. You’re not bamboozled by engineers too, which 00:08:34 Seth:Yeah. Yeah. And I can like talk to engineers and I think like, it really helps me get, buy-in like I can go to the engineering team and be like, yeah, no, tell me the real shit. Like, you know, what’s really going on and we can have technical combos as opposed to like, you know, kind of the, I don’t know if it’s just a whatever stereotype of early CEO that’s like, I need this and this is why, and I’m going to go sell and you know, that can get you into trouble and. Yeah. So anyway, I, I’m a huge advocate. I get some people are really, it’s a scary thing to learn. It does take time. You’re really bad for00:09:08 Jacob:Ever, basically, I don’t think, I don’t think you ever get, you’re not going to be good. Like every engineer you work with is going to be like, oh right, like this 00:09:16 Seth:Exactly, But I do think it’s, it’s really helpful, especially those in the early days. Cause like, trust me, you can look at Google and be like, oh, I need to raise money for my startup, which is what I did.And eventually we did, you know, do some fundraising, but It’s again, the amount of time you’d spend trying to figure out how to fundraise and just jump in this like really deep ocean versus, you know, a skill that you’ll have for life that will instantly, you know, provide value in your current job even.Yeah. I’m, I’m all for it. I mean, I try to get people to code no matter what, 00:09:47 Jacob:I guess like you mentioned kind of that, that early stage. Finding product market fit. Like how long if something’s called wandering the desert, but like how long did you wander the desert? Like how long until, and then when you first started to see those indications, because probably market fits this, like it’s, it’s a bad term because like, It means different things to different people and founders can deceive themselves all the time.And, you know, even, even YC is like, I think one of the best orgs for defining this and communicating this there, their definition is not very good right there. Like, it just feels like it’s going faster. It’s like, okay. Like you can still lie to yourself really easily. So what did that look like for you?00:10:26 Seth:Yeah, no, I could not agree more and could go on lots of, lots of rants about this, or just in general, like, you know, benchmarks or anything like that. I think. You know, and I’ll just speak for myself. Cause like you said, it’s like totally different for every company. but the, the first signs is when I remember I was working the first and only job I had out of college, I was a systems engineer at progressive insurance.So I was in their data center, literally like working on servers, had no idea what I was doing, but, I was there for like six months and I remember I was like at work, searching Twitter, like Rapchat on Twitter, just to. And then over time, like more and more people just kept sharing their tracks to Twitter and like saying how much they love it.And then app store reviews were a big thing. I mean, it’s just clear that we like, like people truly loved the product. and that was kind of the first step. And you can’t really like quantify. It’s not like, oh, there was a thousand Twitter it’s, you know, quotes or. 00:11:29 Jacob:You weren’t measuring like day one retention, day 30 retention. 00:11:32 Seth:Was, I learned that I learned all that stuff over time and like, we track, we track a lot of that stuff, but I’m telling you like the most important stuff was like the qualitative in the early days.Then, but you need qualitative at scale. Like it’s not just like your friend, you know, it’s like, plus you know, 50,000 I may use at that time or whatever it was. And I think that. That was really key. Like the first thing is like, people were actually able to record music on their phone and share it.Some people were really good at it. Like this is, this is kind of like obvious now, but it wasn’t back in the day. Like there was like technical challenges there where, you know, people didn’t think it would be a thing. Some people still don’t think it’s like a billion opportunity, but like, you know, we had to prove out that people would really record music on their phone.Like that was, it seems so obvious, 00:12:21 Jacob:What was the propeller heads app? gosh, what was that called? 00:12:25 Seth:Had a few, I00:12:26 Jacob:There was, there was, I remember this bad podcasting. I don’t know the name of it, but I remember there being some really key like music apps that were kind of around that era. Right. It was like, the phones were finally getting fast enough to be able to do this without like just falling over and dying in 00:12:41 Seth:Yeah. Yeah. 00:12:42 Jacob:Timeframe.00:12:42 Seth:And Andrew, it’s still like really freaking hard to get. Right. But I mean, over time now we have like a process of like, how we think about, you know, does our product work for a certain market? And it’s changed. Like I would say you never really—we’re not in a desert, but you never stop wandering Like your product evolves over time. The market evolves over time. We’ve seen different personas evolve and grow in our community over time. and now, like I said, in the early days, a lot of it was providing just like a fun, social media app that was music-based for the F for everyone. And now, while we do have those components, it’s much more about providing a really great recording studio in your pocket with a community of creators for the everyday artists.Like, so now we’ve actually. Zoned in a little more and focused on one or two specific segments. And we have really strong metrics engagement, now subscriptions for that specific persona. So I think that’s a big thing. Like in the early days, you’d read all these blogs and, you know, what to look at for retention or what to look at for product market fit.But a lot of times it’s not married with context of like personas. And so for the first three years, I mean, we were getting whatever millions of downloads a year. But like this person, in India’s here to have fun. This person in Georgia is here to take it seriously. And we were just looking at it all blended.And so like, once we learned to actually be like, no, like when now we literally ask, like, why are you here? Like, what are your aspirations? And, then we view things through that lens. That’s been one of the biggest unlocks, like, it it seems obvious again, but. If you don’t think that way then in the early days, you’re just kind of like wondering like, well, why is my day one retention?Like not changing. It’s like, well, you know, you’re getting 30% of your users from this like really bad channel and they’re low intent. And like, you should filter those out. because that’s noise.00:14:42 Jacob:I it’s so tricky though, because I was in a similar position when we were trying to work on growth elevate. And, you can, you can really easily. That thing where founders are trying to lie to themselves, it’s a very easy way to lie to yourself. Right. And be like, yeah, I have a great retention if I just ignore all the users with the bad retention.Right. And it’s like,00:15:02 Seth:Yeah. Yeah.00:15:03 Jacob:I think context is the important thing. Right. It’s like, okay, like what are the actual context for this? And I mean, it makes me think of, the photo room, a founder who we had on a couple, a couple of weeks ago. I don’t know the ordering of the pockets come down, but they also had a similar situation where they found it, like within their greater per user base, like a persona where retention was really strong intent was really high.And then it’s kind of great because it gives you, I feel like from a founder and product perspective, it gives you license to focus right. A little bit and be like, okay, like we found this profile, that’s going to be our most important. And we’re going to like really put our energy here. And it kind of clarifies a lot of like things for the, you know, product decision-making. 00:15:43 David:One thing to interject on this real quick is that, I think a lot of people underestimate just how amazing Facebook got at doing this for founders. Because that the feedback loop and Facebook’s algorithm and how much data that had on people prior to app tracking transparency and apple is kind of unwound all of this, but that’s part of why Facebook has worked as the like user acquisition main channel for so many apps to grow is because all of what you were talking about, Jacob, and you were talking about.They just do it automatically with really sophisticated eye AI and way more data than you’re ever going to have to understand people’s intent and the, the, the types of people who are going to. Oh, well in your app. So when you’re feeding those subscription monetization events back to Facebook and Facebook’s experimenting with $50,000 a year money, what are they really doing?They’re doing what you can do. And now with app tracking transparency, we’re going to have to do it more is they’re finding those personas and then advertising to them to get you that return on investment. I think people underestimate how great Facebook did it at finding the. Amazing personas that work in your app.But now, like it’s kind of back to doing what you’ve done. So I’d love to hear a little bit more to, you know, early on just seeing it on a, you know, Rapchat trending on Twitter and like following all that stuff. Like, I think a lot of. Over instrument early and just need to like hit some critical mass first.But then as you get a little further along, you know, you’ve talked about building this like product market fit engine, like how, like, what’s your, what’s your stack. And then how do you think about measuring and learning about those personas and then kind of building for them and orienting the app around that?00:17:44 Seth:I mean, there’s a lot there. So, I mean, again, for context, like we are now just getting into that game, which is like the worst time ever to get into the game where, you know, we’re actually trying to bring those users in with our dollars at00:17:59 Jacob:Maybe, but, but you know, as it’s been disrupted, right. So there’s opportunity. You, you you’ll have probably a better time than somebody who’s trying to adapt from something they got used00:18:07 Seth:Right. We’re going the other way. Pretty much like, so. 00:18:10 David:Facebook charged a lot to do it. That’s the thing it’s like, they captured a lot of that revenue by figuring it out for you, but if you can figure it out and then find those channels that reach those personas in a more cash efficient way you actually are at, at, in a better place. It’s just more work on your side of things, but then you understand your customers better.So there’s benefits to,00:18:30 Jacob:So, so maybe Seth put it on a timeline for me. So like you said, 2008, 2009. So you’re, you’re getting on a, a decade of, of working on this, right. It’s been, it’s been, how long have you been working on. 00:18:41 Seth:2013,00:18:43 Jacob:Sorry. Sorry. How are you telling me a college point? This is before the podcast. Sorry. I’m very good broadcaster.It’s yeah, 2013. So it’s still okay. 7, 8, 8, 8 years or so. So when, when did, when I guess like we are, when did to kind of lead into David’s question, like when did you kind of transition from like, maybe it’s it’s recently, but like at some point, did you go like, okay, like how do I grow this thing? Like, what’s the, what’s the, you know, I see this happening a lot.Consumer apps cause consumer apps really, it maybe they’re inherently viral, but they almost always have to have something to drive the growth. Like some sort of mechanism. When did, did you ever have a point where you started transitioning, start to think about that more as part of the company-building 00:19:26 Seth:Yeah, absolutely. I mean, so I mean to date, like, you know, we’ve had over 7 million people create music in over a hundred countries and over 80% of that’s been organic. So it’s like, you know, we’ve really, that was our whole thing forever because we didn’t have capital. we may have had capital, but we didn’t have enough to have remotely a good budget so we really, yeah, we, we kind of tweaked and refined our viral loops in the early days because that’s all we had. So when I say scrolling on Twitter, that was like the first instance before you could eat, there was a time period where you couldn’t even post on Twitter, you had to open the messages in the app, and then we made it really simple.Again, all this shit’s so obvious now, and now every app does it, but you know, we made it really simple to post a link to your Rapchat to your Twitter and your Facebook. I remember it was only Twitter and Facebook, like two ugly square buttons. because those were the things at the time. And that worked though.I mean, we saw a 10x Return on that. And I mean, to date, you know, that type of flow, come in, create content, share externally, bring your friends in. Some of them will either have the app. Some of them will go to the landing page on the website, download the app, that loop. I mean, that’s been millions and millions of downloads.So, you know, we’re kind of lucky in that sense that, you know, being a UGC and having some network effects, like that’s really been key. and. And just continuing to improve the onboarding, improve the recording experience, improve the sharing experience. Like at some point we, you know, added Instagram and video where we auto-generate a video for you.That was a really good moment because people, and now that’s our most used features, like sharing a video of your. because those do better on social network algorithms. So I think, you know, we’ve kind of had the core loop identified for quite some time and it’s just been consistently tweaking and investing and making that better now, since we’ve had that—and that’s kind of driven itself and still drives itself, you know, we’re looking at all these different other components as well.So, we’re testing out some paid stuff. we’re testing out. Different types of like content marketing and like, we have our own podcast now and we really are bullish on like, you know, creating educational content for the mass music maker across different channels and think we can do some really cool stuff there.We’re starting to explore different parts of like the growth stack, and even web like SEO and web, we haven’t invested in. And we think it’s a huge opportunity because we want to expose this content to. To everyone and we can create unique experiences per platform, and we have the bandwidth to do it now.So now it’s kind of the fun part. whereas, you know, before it was, yeah, pretty much all organic. 00:22:12 Jacob:Surviving 00:22:13 Seth:Yeah.00:22:13 Jacob:How did you make money with the app, like throughout the history and when did you realize subscriptions were the only and best way to make money on the app store?00:22:19 Seth:Yeah, nice plug. no, I mean, we didn’t, we didn’t make money forever. Like until last year I think we hit like we’re hitting year one. So we’ll, you know, we’ll figure out these yearly renewal renewals and all that, but, yeah, we didn’t make money. Like we basically punted making money. Jury’s still out.Like I think if I were to start another app company, I would just implement subscriptions way earlier. But, you know, this is what, when we started and we raised our first round of funding. So we’ve raised three rounds of funding and,00:22:51 Jacob:When did you raise your. 00:22:53 Seth:First round was 2017 and it was very much like, of course the investors are like, no, no, no, don’t make money. know, grow user base, do what Twitter did.00:23:02 Jacob:Oh, you need money. I’ve got some right here. 00:23:05 Seth:Yeah. Just keep raising venture capital. Yeah, yeah, yeah. Essentially like, just get on the treadmill of ambiguous. And then at some point you can do an advertising layer and that’s how it’s done. Like that’s that’s and it’s not like we had any much better ideas either.And we’re like, all right, like, yeah, let’s just keep growing the user base.00:23:22 Jacob:How did you get, how did you get this for years? You just like eating ramen and work in side jobs and 00:23:27 Seth:Yeah, dude. Yeah, Yeah. I mean, so two of them were at college. It was like part-time, you know, like grind in, it took a minute to just to get the test flight out and then the first version then. After progressive I for a year, you know, I just, I mean, I cashed out my 401k and paid some decent money at progressive and sold Bitcoin at like $250 a coin and yeah. Things like that. So 00:23:50 Jacob:Nice. 00:23:52 Seth:Max out some credit cards. I mean, whatever00:23:54 Jacob:You do what you gotta do. Right. it was real, scrappy until that, that, that first round. So, I mean, that’s, that’s the trade off there. Like you don’t either you’re at makes money and like you can flow and like kind of live off it or yeah, you got to do that kind of stuff and then eventually bridge to capital.So I was kind of curious, like how, 00:24:10 Seth:Yeah. And, and to be honest, like that, wasn’t the only time we had to be scrappy. Like even after the first round, you know, like a lot of companies, we were kind of like, okay, we scaled our user base. Like I think, I dunno 10 X after the seed round, but it still wasn’t quite like series a level. So we were kind of stuck in between rounds and it’s like, oh shit.Back off payroll. Okay. Like, here we go again. And, you know, it’s, it there’s Mo there’s been moments, multiple moments like that. and without revenue, it was like, you’re kind of at the, you 00:24:41 Jacob:Is this it’s a safety net, right? Like it’s something you can go back on. Right? That, that, that I I’ve, I’ve been the receiver of that advice. Not, not in this round, that building revenue cap, but in the past of the like, just go, go, go. And it’s, it’s not bad advice. Cause it does like that’s how Instagram did it.Right. There’s examples of companies. But it’s that classic. Like you, you know, people with a portfolio of tens or hundreds of companies giving advice to somebody with a portfolio of one and like the risk there, the, the, the, the, the, the risk equation is fundamentally different there, right. between people.And it’s just one of those tensions with venture capital that exists. And like, you just got to negotiate. So, yeah. It’s, it’s, yeah. You know, it’s a story we’ve heard all too much. I think it’s why. No, I, I be, obviously I’ve got a horse in the race, but like, it’s why I think subscriptions are great. Right.Cause it just like, you can still use venture capital. And in fact, like, I think it’s going to be very accelerative. Right. But, but like you have options, right. And you’re like less fragile now. 00:25:45 Seth:I mean, and I’m happy to say, like after that grind now we’re absolutely in the best place we’ve ever been. We have, you know, recurring revenue, we have more cash at the bank than we’ve ever had, like multiple years of runway. And we should hit cashflow positive, like pretty soon. So it’s like totally different ballgame.And I think to answer your other question, we turned out subscriptions. Yeah. About a year ago. And it really changed the like perspective of product building too. And I think that’s a fundamental difference, like when we were raising our seed round and, you know, we had, I mean, we do, we have a social network on top of our tool and people were like, Hey, why don’t you just try and get to like a billion users?Like that really changes how you build product and what type of features you prioritize? Like, yeah, you’re going to be more like, okay, let me put it in another sharing. Like, let me really nudge you to share or like, 00:26:35 Jacob:Eyeballs. Right? you don’t care. You don’t care. What’s behind them, right. You’re just like 00:26:38 Seth:Like you basically focus on the top of the funnel instead of the middle, bottom of the funnel and like with subscriptions. Yeah. I mean, subscriptions bottom, bottom of the funnel and that’s cool because it kind of focused, it, it focuses you more and that’s, that was just a really, it was all big unlock, like last year and know, frankly, we had to figure out how to make money. We were kind of like in between again and, yeah, it just came to us.David came to us and convinced us to do revenue00:27:07 Jacob:Yeah, I forgot. I forgot that that was the, that was the case. I mean, that was part of the thesis of, of what we built to. I ideally lower the barrier and, and stuff like that. So, but how has, like, has has that, because I think there’s one that you kind of mentioned just like top of funnel versus bottom of funnel, you think of an app that’s driven by virality.There’s like disadvantages to reducing, right. To like, so you must be balancing that really delicately, right? Because you still, you don’t want to, you don’t want to take the gas out of that, that viral loop 00:27:40 Seth:Yeah. Yeah. I mean, especially a year ago when we were like, oh man, we’ve had a free app. We have like, you know, 400,000 monthly active users or whatever it was at the time. And we’re about to introduce this like paid product, you know, it was kind of nerve wracking that tastefully. You know, we took the approach where we didn’t paywall any of the current functionality, like you could come in, you could do everything you did before.In fact, we upgraded the free functionality as well, and then we built new stuff. So like new vocal effects, new ways to like automatically make your song sound better using algorithms, and a few other cool things that people wanted and we paywalled like additional functionality. So I think that was really crucial to do it that.Way and we spent, you know, a few extra months building that, but, that was key. And then people converted and they’re still converting because it’s just like you get the core experience you come in and then, you know, we gradually level them up and we’ve launched one subscription product We have Rapchat gold, which again, unlocks Supreme creator tools.But now we’re working on a second one that we’re going to layer on top that helps these artists make money and gets their songs on Spotify and apple music. And that’s going to kind of complete the artist journey. So, building subscription products can be like really fun and fulfilling for both parties.You know, it’s like, we’re finding ways to help you in your career. And also like, we don’t have to start either, you know, it’s like we can00:29:04 Jacob:Yeah,00:29:05 Seth:Grow together. And that probably sounds too happy, but like really it, it is like, it’s, been 00:29:10 Jacob:You know, it’s almost like an efficient market, right. Where people are paying for value and 00:29:15 Seth:That. 00:29:15 Jacob:Value is getting created, right? Like it’s almost like a good way of00:29:19 Seth:Yep.00:29:20 Jacob:Like00:29:20 Seth:I like that.00:29:21 David:So tell me a little bit more about, about the fundraising process, as an app and kind of being at a, you know, you said there was that kind of in-between time where it’s like, you, you, you had all these signs of product market fit. You were going after the big opportunity. And then when you switched to subscriptions, it wasn’t too long after that, that you, went and raised money, right?Did did the subscription product really take off or was it just early and signs of it? It really taking off that, seed investment. 00:29:54 Seth:When we closed that round, you’re talking about that’s, you know, whatever public and, that, that was around Nico and adjacent came in, you know, we were a couple months into subscription, so it’s not like we had a ton of data, and we weren’t even like fully rolled out. Now we had proof that.People Liked it and good conversion rates and stuff like that. But I think that was iteration one of the paywall and iteration, one of the flow and really early. but I do think it changed the pers, like how, investors perceived our company and we, we proactively changed it too we’re like, no we’re building subscription products for our best users.You know, we, we were able to kind of take control of the pitch more-so than before where it’s like, you’re not making money. How are you going to make money? Are you going to be a social network with ads? Are you going to be a tools company? It’s like, No like, this is, this is what we are like, you know?And, that really put us in control. And, yeah, once we got Nico and a few other, like we, it was also just a good time in the market. Like, I feel like in the past couple of years—you guys have seen, there’s been a lot of activity on the investor side getting into subscription. apps On the market side with IPOs on the founder side with building really great apps that scaled.I mean, Adjecent’s whole portfolio as an example. so I think people were also like, that was the first time where the market worked in our favor. Right. Because before were a music tech social app, it’s like, no one wants to fucking touch that. 00:31:19 Jacob:You’re like a, you’re like Instagram, but smaller.00:31:22 Seth:Yeah. Right. Like, and so. It also like it, it was kind of a perfect storm, I guess.And, yeah, we were very fortunate to get in the right investors that understood the market and also understood like the vision, like the vision was a lot clearer and like, I know Nico really latched onto it and his kind of thesis was perfect for like what we’re doing for music. so yeah, it just, it, it was a good fit obviously Sony was in it and like, you know, that, that was kind of a big key moment to get validation from like the music industry where it’s like, oh, they’re a lot more open and flexible to some of these new-coming technologies and apps and companies.And in fact, like see value in working together, that kind of knocks down that like historical music/tech graveyard of the industry, killing every music tech startup.00:32:13 Jacob:They learned their lesson once probably.00:32:15 Seth:Yeah. Pretty much. 00:32:16 David:Yeah, I’m I’m really curious about, about Sony specifically. And then, you know, you’ve already been talking about Nico, but you, after, after raising that round and going through that process, what, what’s your perspective and maybe even any advice to people thinking about this, about that kind of strategic alignment and the kind of value add, you know, finding that, that company/investor/founder fit. any lessons you’ve learned from that? 00:32:45 Seth:Yeah, it’s hard one 00:32:48 Jacob:Was going to say, I was going to ask like, why? because it sounds like you’re leverage different changed probably right from 00:32:54 Seth:Yeah. 00:32:54 Jacob:Because I, I can’t imagine, did you raise this first rounds in Ohio?00:32:57 Seth:Yeah, it’s some in Ohio, some in the Midwest. You know, smaller funds on the coast, but mostly, 00:33:04 Jacob:To have changed drastically since even 00:33:06 Seth:Yeah. 00:33:06 Jacob:Those first couple of rounds, right? Like it’s going00:33:08 Seth:Yeah, for sure. For sure. No, we have a lot more left. I mean, we’re, we can be a lot more choosy. We’ve got to pick like really great investors as of late. it’s a whole different, yeah, it’s been, it’s been crazy.Crazy awesome. But yeah, I mean working, I don’t know that you’ll get a lot of different advice in working with strategics or big industry partners and depending on who you talk to, some will say don’t touch them at all. Some we’ll say, if you can work with them, work with them. you know, all I can say is, from my experience, like, it’s, it’s not easy.Like you’re working with a massive, usually a public company and they have a lot more process than, than you do. So like literally getting a deal done is just going to take longer, be more strenuous, probably have a couple of strings. We were fortunate enough for it to be a really good, like clean same terms type of deal, but.It’s, it can be really difficult. and that’s kind of up to the founder and the company to figure out like, is it worth it? you know, for us major record labels are. Still kind of the end state for a lot of potential artists in their journey. Like they still provide a lot of value if you get to that point.So like, of course we want to, for the long tail, for our, millions of creators, give them that opportunity. if we can help bridge the gap to get signed at some point, that’s really, that’s really interesting to us. but yeah, it’s hard and again, it’s very contextual. It depends on every deal.It depends on every company and in general, It’s just, it’s gonna take a, it’s gonna take some time, 00:34:36 Jacob:Yeah. dealing with like a big company, like, like Sony, like venture deals, probably the only thing you’re probably tooled for this stage. Cause like that’s a bit cleaner, right? Like a venture deal. It’s like they invest money. Yeah. If you can get it on the same terms as like another venture investor, like it keeps it clean versus like if you’re working on partnerships or something like that, it gets more complicated and I think different.And I’m sure, I’m sure that’s probably something you’re thinking about going forward. It’s like, how do you actually like begin to really engage on those partnerships? I think that’s even harder. So in this specific case, or like maybe a more general case, I can venture a small, like venture investment. It can be like a nice way to kind of just like, get your foot in the door with, with a company or like a strategic, just kinda meet people.Just kind of give them some visibility. And then as you grew up, but I would be, I would ha I would caution against like, trying to engage on some big, hairy, strategic, like, partnership deal. I would like push that out until you get a bit bigger. And like you said, like can match the, like the bandwidth differences a little bit better.00:35:33 Seth:Yeah. I have like our own general council full00:35:36 Jacob:And a partnerships 00:35:37 Seth:Tons of it. yeah, 00:35:41 Jacob:That might probably not the best use of your time at this stage. Right. So.00:35:45 Seth:No, I totally agree. I mean, that’s, that’s, that’s pretty spot on 00:35:48 David:And how did you even get an intro? I mean, if you don’t mind sharing, like, it seems like it is such a perfect fit, but even those perfect fits, like sometimes it’s hard to just even get your foot in the door. 00:36:00 Jacob:Email CEO, 00:36:01 Seth:Yeah, right. honestly, like that’s, shit, I don’t even know. I mean, I think someone might have intro to us, or I, I reached out to somebody, I mean, we’ve had a lot of different contacts. I mean over the years and you guys know this, but like now, okay. We’ve been startups for five, six years and have pretty good network and investors, partners, founders, and it’s just kind of a flywheel like now, you know, things come in, things go out.Like it’s kind of a engine. I think with that one, it was later on in my like startup journey. So I had a lot of. Connections out there already with the other major labels too. It’s like, you know, we we’ve talked to, we’ve kept in touch. That was one thing I think we’ve done really well throughout, like our time, even though we, you know, we’ve been around for a minute, but we’ve consistently like kept people updated, whether it’s investors, whether it’s potential employees, whether it’s partners and you know, sometimes like the guy you knew or girl who.Four years ago that you were talking to at a specific part of a bigger company is now leading venture. Right? Like in that, that type of stuff happens a lot. And I don’t think this is one of those instances. Like I literally think we talked to one division of Sony and then someone like, introduce us to another like, oh, you should talk to the U S music department or whatever.And, you know, all that to say, like, it’s just happens. Like you just reach out to people or people reach out to you. There’s there’s no like magic 00:37:29 Jacob:These, big places have venture teams typically, right. Or they have like some venture part of their Corp dev wing. That’s like, has, you know, funds and knows what they’re doing usually. but, but yeah, I mean, it’s tricky to. Pick partners like, cause yeah, you also, like we’re, we’re a interesting company in the sense that like we have kind of many implicit partners.Right. and it, it, it, you know, there’s no, like there’s no like cap table, you know, wedding rings between any of us, which, which maybe simplifies or doesn’t, 00:38:01 Seth:I thought you guys own like 10% or at yet.00:38:04 Jacob:Yeah, that was, that was that’s how you got our free plan. 00:38:07 Seth:Right, right. 00:38:08 Jacob:Days you didn’t read the full, you didn’t read the 00:38:10 Seth:Yeah. 00:38:11 Jacob:Terms of service, parody, parody, comedy. 00:38:14 David:Yeah, I did. I did want to ask, Facebook. Kind of jumped into your space not too long ago. 00:38:22 Jacob:Where were you? Cause you, we guarantee you, you remember when you saw this, but w what were you doing when, like you saw like, Facebook, like clingy guys?00:38:31 Seth:I honestly think I might’ve been sitting right here. Like I think I was just working.00:38:35 Jacob:Yeah. 00:38:36 Seth:It was nothing special.Like. 00:38:37 Jacob:That’s Like a S a founder moment. Like, there’s these moments where you’re like, oh, somebody just like a bullet, just grazed my ear. Right?00:38:43 Seth:No, I wish I could say I was like at the gym on the treadmill and then it came in and I like jumped up the treadmill. 00:38:50 Jacob:It’s most likely you’re sitting at your desk, 00:38:52 Seth:Yeah, statistically. Yeah. no, it was, it was kind of a weak, like I don’t, I don’t even know how to describe the emotions. I mean, I was just like, I kind of laughed. It was just like, okay.You know, I definitely wasn’t. Like scared or super worried or freaking out, like, you know, it’s maybe, I don’t know, 2019 me or something or in the early days would, I’m like, oh shit, like now I can’t get venture funding or now I can’t like keep building, like, they’re going to crush it. But I mean, we’ve been around in some minute ourselves, so yeah, I just, it was kind of funny and ironic.And then it went like many viral on Twitter with a lot of, you know, my network and other people. And then, I had friends sending it to me like, oh dude, what do you gotta do? And, I don’t know, man, like just probably download it and see how bad it is and go from there.They’re like, yeah. And it was, and honestly, it was just kind of a fun thing.Like, you know, it, it did, like we got press around the round and then some people could write about that. And it was kind of a funny story and somewhat of a badge of honor, like people, you know, they copy a lot of the top apps. And again, it’s just kind of like validation that like clearly you’re onto something.I mean, they used the same. Color scheme emojis at okay. One of my most proud things. 00:40:10 Jacob:Stuff that makes you angry, right? As a 00:40:12 Seth:Yeah. 00:40:12 Jacob:They cloned you it’s that they 00:40:14 Seth:Yeah. 00:40:15 Jacob:Right? That’s what makes me mad. 00:40:16 Seth:The thing that really got me was, Like for our like, button, right. it’s a flame, it’s like an emoji. And like when you hit it, it like turns into the actual emoji flame. And I always thought that was like the sickest thing ever.Like they did the same exact thing. I was just like, all right. Like, I mean, that’s what the little things are, what confirmed that they actually kind of like really looked at your, your app. But, no it’s been, I don’t even know what they’ve been up to. I don’t even know if they shipped updates. It’s zero concern to us. it was just kind of fun. It was like funny to share with the team and, investors and, you know, a lot of investors were like, hell yeah, like that’s a good sign. Like 00:40:55 Jacob:Yeah, you should hire somebody off the team. 00:40:57 Seth:Yeah, right. Oh, trust me. I would love to 00:41:00 Jacob:Because like you just think about like, yeah, I, I think you’ve got the right mentality about it. I’m not even telling you this as like, trying to make you feel better. Like really? Cause like, think how much more skin in the game you have it. I don’t know who built this.It’s probably some product managers like promotion, packet, project or whatever. I’m being condescending to people working in big companies. But you know, but, but, but think about it like this, you know, this is a, this is a one-time thing there’s trying out, right? This is. Passion, right. This is your life or you’ve last whatever years, right?Like good luck. Unless it, unless they just happened to be way more talented and way more funded, which maybe Facebook is, but like they’re not, they don’t execute perfectly on everything. Right. So, I think you just smile and you just be like, yeah, let’s go, right. It’s not, it’s not like apples competing with you and being like we’re pre installing a chat wrap 00:41:42 Seth:Right, right. Yeah. 00:41:44 Jacob:Which you know, could happen, but 00:41:46 Seth:Sure. Yeah. I mean garage band. Yeah, I appreciate that. I mean, the thing is also like, look in the early days we were. I’m just sharing this for context. Like we were, you know, one of the first apps that actually let you record your voice over a beat and share it like that was like New.Okay. Now there’s plenty of apps where you can come in and record vocals. You know, different types of audio for beats and like music making apps are kind of a commodity. but what we’ve done that I mentioned, and we kind of fell into this was like, we built that social layer, that community layer, and you can’t replicate that, you know, like they can come in and replicate the tool and have a feed, but like, nah, dude, we already have like hundreds of thousands of like passionate creators that have been with us that have been riding with us. And my favorite thing was when complex tweeted. And like complex being like a very like cultural industry outlet. And they tweeted out and their responses to that were just like the most hilarious thing. I don’t even think I could say like half of it, but it was like, basically like Zuck this like reptile coming into like, you know, vulture culture vulture and like, oh shit, that would be my worst nightmare.People said about us and they don’t like, it’s just are we’re authentic. And you know, we really care about the community and that’s, you know, That’s 00:42:59 David:That’s awesome. Well, I think that’s a great place to wrap up. We’re coming up to the top of the hour, but I did want to give you a few seconds to pitch. I know you’re hiring and you got a lot going on right now. Any specific roles at the company that you think our audience might be a great fit for? 00:43:17 Seth:Yeah, for sure. I appreciate that. I mean really just like product builders, and I say that broadly. So, engineers, designers, growth marketers, we’re looking for really great people to help us scale. Again, we’re still a small team. Ten people fully remote and, really looking to scale the product and the company. Now that we have some stability it’s a great time to jump on board. We really think that this era of mass music creation has begun, and we kind of kickstarted it, but we’re only getting started, right? We just have a really strong opportunity to provide the everyday stack for the everyday artists.00:44:04 David:Yeah, that’s amazing. I took a look at your careers page. It looks like there’s some great opportunities there across the whole stack, which is fun. 00:44:13 Seth:Where were you looking at, David?00:44:17 Jacob:You guys are welcome to have this conversation, but just let me leave the room, please.00:44:22 Seth:I’m kidding. I’m kidding.00:44:25 David:I do have a background in audio engineering.00:44:27 Jacob:Yes. True.00:44:31 David:No, I’m not in the market. I have too much fun having conversations like this with people like you.00:44:37 Jacob:Alright, thank you for listening to the Sub Club podcast. 00:44:41 David:That’s a great place to go out on there. Thank you so much, Seth, for being on the podcast. It’s been great. You’ve been so generous with your time and just sharing.Seth’s been on multiple other podcasts. He’s been on app promotion stuff. So, I love it when people in this space are open and share about the successes, the failures, how they’re building things.So thanks for your time today and for being so active in the kind of broader app maker community. 00:45:11 Seth:Yeah. I just want to say, thanks. Thanks to you guys. The podcast is awesome. I listen to it, every episode. Not to plug your product, but your product, we love it. It’s been instrumental in building a real business over here.00:45:30 Jacob:That’s awesome. 00:45:31 Seth:I just appreciate you guys. Yeah. 00:45:36 Jacob:Thanks. It was great to meet you.00:45:38 Seth:Likewise, man. Let’s let’s hang out. You guys take care.
  • Sub Club podcast

    Finding Product Market Fit by Unbundling Photoshop — Matthieu Rouif, PhotoRoom

    44:36

    Watch the video version of this show on YouTube »Matthieu Rouif is the co-founder and CEO of PhotoRoom. PhotoRoom enables anyone to create studio-quality photos on their iPhone. Before founding PhotoRoom, Matthieu was the Senior Project Manager at GoPro. Matthieu is also the co-founder and CTO of HeyCrowd, and co-founder and CEO of As-App.Matthieu earned his graduate degree in materials science and engineering from Stanford University, and his bachelor’s degrees in economics, and physics from École Polytechnique. While at École Polytechnique, Matthieu was a member of the skydiving team and debate team. Matthieu also served as a Parachutist Commando Officer in the French Air Force.Matthieu started developing apps in 2009 as a student at Stanford, and subsequently started two iPhone app companies. He was part of the Replay app team when they won App of the Year in 2014. Matthieu started PhotoRoom after leaving GoPro in 2018.In this episode, you’ll learn: Matthieu’s retention strategies for keeping app users subscribed Innovative and clever ways to get users to demo your app Balancing your app’s pricing and features How churn can be an asset Links & Resources YC HeyCrowd GoPro Photoshop Zenlea Shopify Poshmark Depop Corel Matthieu Rouif’s Links Matthieu on Twitter Matthieu on LinkendIn PhotoRoom is hiring! 10 Tools to Ship an iOS App in 2 Weeks PhotoRoom’s Website PhotoRoom API PhotoRoom on Twitter Follow us on Twitter: David Barnard Jacob Eiting RevenueCat Sub Club Episode Transcript00:00:00 David:Hello, I’m your host, David Barnard. And with me as always, Jacob Eiting, RevenueCat CEO. Our guest today is Matt Rouif, co-founder and CEO at PhotoRoom, the app for removing backgrounds and creating studio quality photos right from your phone.On the podcast, we talk with Matt about how his time at GoPro led to founding PhotoRoom, how churn can actually be an asset, and how being locked in Apple’s basement led to one of PhotoRoom’s biggest marketing wins.Hey, Matt. Thanks for joining us on the podcast today. How are you doing?00:00:48 Matthieu:Great. Hey David, Hey Jacob.00:00:51 Jacob:Hi, it’s nice to finally meet internet/virtual face-to-face. We’ve known each other for a little while. I’ve become fortunate to know you kind of through RevenueCat, but not actually know-know you. So, it’s nice to finally put a face to the name.I was looking back through my email and I think the first I ever heard of you was from our mutual friend, Cisco, if I say that correctly?00:01:23 Matthieu:Yeah, Francisco.00:01:24 Jacob:Francisco, who shared with me a blog post that I had seen that you wrote where you talked about RevenueCat as part of your stack. Since then, I think we talked as you were thinking about going into YC, and then after YC, I put in a little bit of money, so this is a good opportunity to check in on my investment.I’m super excited to dive in, because there’s a lot of questions. I kind of have followed you guys and kind of seeing some of the stuff you’ve been doing, but I don’t know, like the behind the scenes decision making processes and like, and all that stuff. So yeah, I’m excited to hear the story firsthand.00:02:04 David:Yeah, but before we get into PhotoRoom, you’ve got quite a history in app development. So, I want to go back to the beginning and talk war stories. A lot of people were in the industry way back when. Jacob and I both started really early as well. So, you got your start during the Stanford class and you were actually a teaching assistant at Stanford at the time, right? I’m kind of stealing your story, but yeah. Tell me, tell me how you got into it.00:02:34 Matthieu:Yeah. Actually I wasn’t a teaching assistant in physics. I was doing a master’s in physics at Stanford, right at the moment of the first iPhone class. And, I actually went to Stanford because I was fascinated by the entrepreneurship. And I had this business idea of printing photos and sending them.And that seemed a lot easier not to buy hardware, but just use the iPhone which just started at that point. So, I was at Stanford, there was the iPhone class. I wanted to do a photo app. So, see, 12 years later....00:03:05 Jacob:A 12 year overnight success.00:03:07 Matthieu:That’s what they say. Exactly. And, yeah, I got, I actually, I got started, programming.I was doing physics before, and I didn’t know anything about programming. So I took a class with a friend that went through the basics, and I just wanted to push products on apps. And I found that the iPhone was the best at that point. And actually the photo app became something else.The first company I started back in grad school and they became like a ski resorts app. I shipped, we had all of the major ski resorts. And, It was a great, I did that for two years and a major ski resorts and, yeah.I started an apps company after that, one called HeyCrowd around a social network. So like we had surveys that you could answer to with polls, like, a bit like Instagram stories now, and that didn’t work so well compared to the ski resort, but, yeah, I got into iPhone apps right since the beginning.00:04:18 Jacob:I remember the Stanford course. It was on iTunes U that was mass disseminated or was it the later one?00:04:25 Matthieu:No, it was the one that it wasn’t Stanford U. There was a, the guy from Fitboard during the class. I don’t know if it was doing that.00:04:42 Jacob:Yeah. I remember. I remember it being like the moment when we were like, oh, this is going to go mainstream. Right? Like, because up to that point, you had to learn iOS by doing basically Mac OS. That was like the one point there was the big nerd book you learned Mac OS, and then the SDKs came and you like tried to learn quickly, like what worked and what didn’t.But, if you were like me who came from no Mac programming, there was really no iPhone entry into it. I remember when the Stanford course came out. It was like one year too late for me. Because like at that point I had already done a lot of stuff, but it was still really great.I still watched the whole thing. I remember watching it. But it’s interesting. We have the same path. I don’t know if we ever talked about this, but I was studying physics in undergrad as well. Yeah, I didn’t go to Stanford, but I went to a small state school instead, just cause, you know. But yeah, kind of similar story where like I was in, I wasn’t in grad school, but I was physics, undergrad.Didn’t really know what I wanted to do. I really loved physics and the math and all that stuff, but like, there’s a stronger economic pull, let’s put it that way, to work on apps. That was the same story for me. Like took a little bit of what I had learned, writing code for experiments and things like this, and then kind of started making apps.And then, yeah, the rest is history.00:06:06 Matthieu:Yeah. I think one of the introduction to physics is like how fast data applies to the real world from science to real world. And you don’t find that in a, like a physics job where you kind of find that back in, like a software development where you like, can we solve a math problem, a computer science problem, and you can directly apply it to real00:06:25 Jacob:Yeah. Or like, even with business modeling and stuff too, you know, you think about how a business moves and like what number moves this number. And there’s no physics there. You’re not approximating a physical system, but some of the same principles apply. Right. You’re like trying to find some laws that are underlying it and work from there.So yeah, I found it hasn’t been terribly unrelevant, but, but yeah, that’s interesting. What else, what else do we have in common? Let’s keep going.00:06:48 Matthieu:Yeah, sure.00:06:49 David:Well, actually, I, I want to jump in. I want to get to PhotoRoom, so we’re actually going to skip over. You’ve done a lot now. So after, after that you went to replay and replay was like onstage at a keynote. And you’re the co founders that you were working with, you know, as, as you joked, before we started recording, spent a month in the basement and apple, as everyone does before a keynote.But then you ended up at GoPro working on imaging. so just tell me about that. Leaving GoPro. I mean, Great company done a lot of innovative stuff. but tell me about leaving to start a PhotoRoom and what the inspiration, I guess we’ve heard part of it, you know, 12 years of working on imaging and wanting to build a photo app.But yeah. Tell me about the founding of, of.00:07:36 Matthieu:Yeah, I, I, so GoPro is an amazing company, but it’s more marketing and hardware. And, I really wanted to, I grew a bit frustrated about like how we could, do better software. Yeah, a few frustration from that I, as a product, I was product manager by them. So I was like frustrated with the design tool, like a Photoshop and, and, you kind of have to move to, and by that time you had to move to California to move the stuff.And I was based in there in Paris and I decided to stay there with the family and, and kind of, we had an amazing missionary team at GoPro in Paris, but it’s really difficult to. To change the paradigm of a kind of a software, like a, if it works from a kind of more deterministic way. So I kind of realize that it’s really tough to ship a new software with new paradigm, and we’ve mentioned our new insights.So I thought there was a big opportunity with the new, new hardware coming on, the iPhone formation, learning the new, the new, yeah, this new kind of way of thinking about software. And, I left the GoPro to start a company and we’ve just ideas in mind. And I also, at the time realized that there was a. A lot of apps, you know, like after 10 years on the app store, you kind of know the tricks of the app store. And I knew there were a lot of apps in the top of the photo apps that were around razor and background eraser. I realized like, okay, if they’re just kind of a, you know, I say scam, but it’s certainly scam, but all these apps that are built quickly, there must be some demand around it.And so that’s, I started with the background remover idea. Like I saw that there was a mission learning team at GoPro that there was some background removal, paper and all that. Okay. There must be some demand. Let’s ship something quickly and see how it goes. And that’s kind of the nice thing of like 10 years of development, you know, the right tool to go fast and just shipped a prototype in two weeks.We’ve actually referring at, by then I have a blog post on like the 10 tools I use there and, And, yeah, it was, it went super fast, super fast to the store and we have some machine learning and, on-device machine learning by then. So it’s as a, and it kind of caught up, like you tried a dozen ideas on some kind of stay on the wall on some, like, and just stay on the wall.00:09:43 Jacob:So at the time it was called BGE app background app. Right. was the focus initially, did you have like a big scope for it or was that your entry? You were like, Hey, I know that they there’s these photo apps that kind of suck that are doing this background thing. I think we can do it better. And like, let’s see where it goes from there.Or did you have like a bigger plans or longer term aspirations? 00:10:04 Matthieu:I think there was, an understanding that people kind of needed that and the tech tech was 10 X better as they say. So it was really interesting, but I didn’t, I mean, we didn’t have the full plan for that. It’s really a few months in that we are understood with Elliot the kind of the market fit.And we understood also like this idea of, and we call it, we translate pixels into concept that makes it much easier to, to, to edit. So w for the room is the best for digital for entrepreneurs. And the idea is that instead of using mask and layers and pixels, you just like, the machine learning, understanding what are the.The big cells and they just tell you, okay. A cat. So we call it cat to catch up on the cat. And you should have actions that are relevant to a Catholic changing the fur color. if it’s, if it’s a piece of clothing, it should be the texture of the clothing. If it’s a, if it’s a kind of graphic change of color, you know, kind of, it makes it much more accessible than what exists in like 10 year, 20 years, software that exists by for the editing.00:11:03 Jacob:So, so yeah, I mean, I think that sounds like a very much a pitch and a story that somebody would be taught at Y Combinator. So I’m curious, like what I’m curious, like, how did that evolve? Like how so you, you, you, you guys launched the app in the, I remember I was talking in like the spring of 2019.00:11:20 Matthieu:Yeah. Like may 2019. Exactly. 00:11:22 Jacob:And then, you started YC in the fall or the winter?Yeah.00:11:25 Matthieu:No, we actually, so we started YC in the following summer. We were supposed to do the winter batch after that. So seven months. And, we, we couldn’t because our visa issues, at some, with the family, I couldn’t move to, to, to YC. Yeah. 00:11:42 Jacob:Can tell you there’s one way to solve that problem.A global pandemic.00:11:49 Matthieu:Exactly. Yeah. That’s exactly right. So we did it involve, I think we shipped super fast. We failure my co-founder who is like a, like a machine learning genius. and we follow early on the YC startup school, which is kind of the, first step to. And, and so what does it help you? It kind of, you measure the, yeah, the progress.So, how much customer you’re talking to, Ahmed, how much money you made and how happy you are doing what you do. And so that’s kind of how we iterated 00:12:24 Jacob:You were 00:12:25 Matthieu:Months. 00:12:26 Jacob:During, startup school or 00:12:28 Matthieu:Yeah, the school kind of asks you every, every week, discussion and you make sure you make progress on that. I think these are the right question to make progress on your business.And here’s, what’s kind of, kind of natural, like two months later. So we started in may, may, June on that, application for YC where I probably in September, like, so, so we did like all summer, we did the startup school scheme and then framework and made some progress on that. And we got the YC application in September and the interviews actually in Paris, In, I think November.00:12:57 Jacob:And then, ha had you, I guess like, your, your aspirations or your reasons for applying, I guess, are in some ways, self evident to somebody. You know, obviously you don’t need to convince me, but for the listeners, I, what was your, yeah. What were your motivations? Like? Why did you, well, I guess for one there’s, you know, I don’t know.I always hear there’s a couple of reasons, right? Like sometimes it’s prestige, like people want to the prestige of YC, sometimes it’s, it’s the help, which I honestly think is the, the, the best reason. Cause I, you know, it’s, it was honestly really good for us, but then there’s also like, you know, it’s, it’s a great way to springboard venture back.Thing, right as well. So like, did you have like strong reasons? Was it all of the above or what was the motivation for, for getting on the venture? 00:13:44 Matthieu:Yeah, that’s a good question. so I think number one reason was, ambition. I think like a lot of your brain startups, you Batara, can be not ambitious enough. And I think if you’re ambitious, like YC is really a way of, the alpha taking the ambitious path. Okay. Then how to make it like a business and a product that has a strong impact, like on a very large number of people.So that was, that would be my number one. I think then it’s kind of the learning. we are at the beginning of the company, we sit for failure, then what’s what kind of is the most important, you know, for their culture. And we talked about it also. And, one thing we really value is learning fast and I think YC kind of helps you, you probably a lot of like, you learn so much faster because you’re at the right contact.So it’s, I mean, it’s. It’s on the partners. Like every time we have a office hour, almost every time, like, wow. Blown away, there is like also Atlas. I get the right investors, I mean on the revenue, on the like mobile subscription and like, yeah, like you like auger from Blinkist, like, someone from, John from Spotify.So that’s really helpful and also extra connection like we have in AI, we have the VP of AI and locale Facebook, and I don’t think we could reach this network with, with. 00:15:01 Jacob:Yeah, the network thing is depends on, you know, what your background is. Obviously you had been in the peninsula, but still it’s hard to be really deeply networked and still it’s hard to. Invest in your engineering skills. Right. And like your IC skills and invest in a network at the same time, which was kind of my world.Like I had an okay network, but like, it wasn’t super well networked. So YC was like a big like boost to that. Right. You could get interest to people. You could get a little bit, it’s still, a who, you know, game Silicon valley is still in a lot of ways or the broader concept. 00:15:33 David:Before we move on. I wanted to talk to us a little bit more about the, about the ambition of PhotoRoom, because, and this is something I think is, would be really relevant to a lot of our listeners who are, are building apps in the space. And, and I, as an indie developer for 12, 13 years, feel like I’ve, I’ve, I’ve worked too much with, with blinders on.Not thinking about the bigger opportunity. So like the first app I launched was trip cubby. It was a model it’s log tracking app, to get reimbursements from taxes or get reimbursed from your company, for your mileage. And I just, I treated it like a little tiny indie business, lifestyle, business, and everything else.Meanwhile, 00:16:19 Jacob:IQ00:16:20 David:IQ built a huge 00:16:23 Jacob:Probably launched about the same time. Right. I would think. 00:16:26 David:No, they launched much later actually, which is even again, it’s like I had a multi-year lead as kind of the, how to do that 00:16:33 Jacob:Assuming the market was there. Like my, like you probably came when the market was finally there, 00:16:37 David:Starting to grow, but yeah. But what’s so cool. Is that, I think there’s so many opportunities in the app store that people overlook that seem really niche. Like you just started out replacing backgrounds in photos, 00:16:50 Jacob:And now you’re going to be the next generation Photoshop. Is that a good one? Is that a good pitch? I don’t know what the 00:16:54 Matthieu:Yeah. 00:16:57 David:What, what’s the ambition that, where that took you from, okay.We can replace background images too. This is, could be a huge business because we’re, un-bundling one of the like key parts of Photoshop, which is a massive business. So what, what, what is the, what was the ambition and what is the ambition that you feel that this, this can be such a big thing. 00:17:21 Jacob:How did you, how did you convince yourself of that? The ability to do that?00:17:25 Matthieu:Yeah. 00:17:25 David:Yeah.I mean, it’s, it’s amazing.00:17:27 Matthieu:I think it’s, well first like working on photo, video editor, like I realized that, I mean, video is big. Like we got, I think we free-play then named quick by GoPro. We got to $100 million. It’s kind of tell you like, and most people, they are still using like photo collage. So everyone’s working on photo and video is too complex for most people.So like, if you get 100 million for a video, then it’s probably like any good, like yeah. Project improvement like 10 X product improvement on photo must get like 1 billion users. And I think it’s like, that’s one of the YC model, but it was really starting from a pain point of myself, like creating the assets for actually for the app store.Like you have to create a PSD. And I was like, you spent so much time on non creative task. And I was like, I want to make that much simpler. And I think the big heart moment was kind of talking to the user. So, and also like talking, yeah. Talking to people like we kind of build in the open and people told us, it’s like, yeah, Yeah, it’s a, it’s like a actually it’s like programming, like a U instead of you’re you’re doing like, object oriented, editing, like you understand what kind of objects you have and you make actions that are relevant to that.And that’s, that’s kind of done myself, like really burning myself away. Like it’s much simpler. Like you have an object and you, you offer it to the user. What’s the logic for the subject lines, Photoshop. It’s such a pain to learn. Like I think everyone would remember is kind of the blown away part of Photoshop, but also the pain it is to understate.00:18:51 Jacob:And it hasn’t gotten easier in 20 years. Like the only way now you can paint on a sphere or something like, there’s nothing like new, I still open it and it’s comforting. Cause I learned in CS two or whatever, and it’s all still the same, but like, I don’t think it’s necessarily, like, I think, I think there’s even a broader near you.I’m going to make your, your $10 billion company, a trillion dollar company. But I think there’s an even broader narrative there around just like the future of software and how machine learning. Further like narrows the gap between like in software, like programming, not in the traditional sense, but like telling a computer what to do and the computer telling, like asking us or like bringing us like the things it can do.And you see this in like varying degrees of it working well. Right. like Gmail, like suggesting like absolutely insane sounding replies that I would never say, like, that’s kind of that, but, but I think that’s all maybe a little bit too far, but I think what you guys are doing, it’s really great. You know, like segmenting photos, like giving people those tools, like taking, especially for a tool like email it’s like writing, like, I don’t know.An AI assistant to like, say, thanks like I can, I got that. Thank you. But for, for, yeah, like, like cutting backgrounds out and like setting up. Yeah. Just building like, things that to a human, because we’re so visual in the way we think seem really basic, right? Like I want the cat in front of a blue background, right?Like that. Just tell the computer and it can do that right now. The existing tooling is like very manual and very skills driven. And you guys are bridging that gap. So like yeah. Who knows something? I don’t know. Maybe photos, aren’t the end of it for you guys, maybe next you just start tackling the next software domain.Right? I, you know, I don’t know that we’ll get to 10000000001st and then we’ll worry about the trillion dollar.00:20:28 David:And that’s the really magical thing about your app and your onboarding that I wanted to ask you about. So exactly what Jake was saying. When I think of removing a background and I’ve worked in Photoshop literally since the nineties, late nineties, I’m old. but it’s, I’ve tried that like a hundred different times.And even in the most modern Photoshop, I don’t even know how to do it. I expect it to be. I downloaded PhotoRoom and in like three taps, your onboarding is magical because you don’t get in the way of the person having a desire to get something done. And then seeing it happen. So in like three tops from opening the app, I see a background removed and it was just like00:21:16 Jacob:Okay. 00:21:16 David:Instant, like mindblowing experience. 00:21:19 Jacob:Yeah.00:21:20 David:This thing that like, I know it’s so hard and I think of needing professional tools and needing to be a professional to even figure it out. It just happens magically after three or four taps in your app was that I assume that was very intentional. Did you have different onboardings before and kind of iterate to that point?Or what led you to just such a focused get the person to that?00:21:45 Matthieu:Yeah, that’s a good grade. She was our interview. I think, we like, if we, especially in the beginning every week, we’d go to McDonald’s and pay a meal to student or anyone. And they like the tagline for McDonald’s and Frances com. Everyone can come in and come as you are. So we really met like tourists students professionals, and like doing user interview.We got so frustrated. I think that people didn’t get to the step of removing background that kind of like00:22:12 Jacob:Oh, so you would give them an unlogged out like a brand new device and like, watch them go through onboard.00:22:17 Matthieu:We would like pay the meal initially for downloading the app. We’d like first ask you three, four questions about their photo usage on their, on their phone. kind of ask them to download the app and yeah. Blinded as yeah. And, and we were like came sneaking. We just were, we were just iOS at the beginning.So try to find people with iPhones and not Android, and that was stuff, but yeah, I mean, people usually stopped before and they don’t understand something and like to build trust with them, we figured out like the best is to short tech. So I can we get to the point where. We actually have all these people, we try the app that actually see the bag, the magic effect of Futterman like, so like taking a white sheet of paper, we valued microphone and like thinking, how can we do that?And it got to like adding that as early as possible in the onboarding. I think that’s, that’s, that’s fine.00:23:06 Jacob:I think, I remember now reading about the McDonald’s testing and your, your, YC application and being like. That’s the moment I knew these guys were going to make it, I guess like it’s was brilliant, right? Like I, I don’t know how much user testing, like real good user testing is. If you do it in some sort of like professional context, it’s probably really weird and like expensive and like hard.And this is dead simple, super scrappy. Right? People don’t do it because I don’t know nerds. Don’t like talking to people like we don’t like, you know, it’s, it’s, it’s tough to put your, your app in front of somebody and see them. Not, it’s one thing to read like bad retention numbers on amplitude is another thing to like, see somebody actually churn and like, but honestly that’s the best way to learn.Like this is the best way to like, get really actionable feedback. So, I’m sure that was, that was super beneficial.00:23:53 Matthieu:Yeah, it’s a, it’s a trick from Zenly. So the social network and maps, like that really is, one of the best, app in embarrass and they, and we apply that and yeah, it requires some. It’s not easy, I must say. But, you really, you learn so much and the pain today is more like we have more qualified users.So it’s really easy in the beginning when you’re in your photo apps and people just as the app and everyone has photos. So it’s easy to explain. Then you want to like talk to your kind of retain user. It’s difficult to get them at the McDonald, but now we’re friends with all the vintage shops around the block.So in Paris, so we get.00:24:28 Jacob:So that, yeah, that was I kind of my question I wanted to ask. I’ll just slide it in now, but like I’ve noticed, I don’t know. I don’t know if you had this intention initially, but it seems like you’ve found a new. Even amongst these apps in something I would say commerce or even e-commerce it seems like a lot of people use these, use your app to take photos of objects, to use as like advertising or gone Shopify.Is that, is that true and statement or am I just like misreading investor updates?00:24:56 Matthieu:No, it’s totally true. Actually, it’s not. The interesting thing is it came from a personal lead, like using, as you say, Photoshop and wanted it much easier for me, but I wasn’t clear who was using the CRA’s background apps. I’m talking to like user at McDonald’s. We realized like there was all these reselling apps, especially in the Europe and the U S where people.Yeah, they’re just like selling Poshmark on vintage in Europe and they, there is no app that’s focusing on their photo need. Like everyone’s doing like selfies or I dunno, whatever lens on video you can make or, but, no one’s in it helping them. And it actually came from the user interview like, oh, that some user told us like, oh, my girlfriend would love that she’s selling on Depop.And, and we kind of like it after multiple user asking us in support. asking us, and in talking at the user interview of my goal, we realized that, oh, that’s a niche that we should kind of focus on. So that’s Allie Kim, 00:25:51 Jacob:Was that pre YC, like pretty early in the process.00:25:55 Matthieu:And it came in a few, just not in one day, but it, I think early, after being taken at twice a 00:26:02 Jacob:Okay. 00:26:03 Matthieu:Like early 20, 20,00:26:04 Jacob:So then my next question, I guess, is like, how do you decide then? So you have a car for strong product. You, you, you might have like varying. This is, I think this is very common for a lot of apps and companies is like, you have probably different levels of product market fit depending on the market.Right? So like maybe broadly across all users of iPhone, your product market fit may not be as strong. But then when you look at this one niche, like maybe it’s really strong. And then I think some. End up in a situation where you have to kind of decide, like, do I want to go for this maybe less fit, broader market, or maybe a tighter market with a stronger fit that I’m starting out with.Did you have that internal conversation? And then did you make an active decision? Like we’re going to focus on this and then yeah. And then what’s the plan after that? Like, or is that the forever plan?00:26:48 Matthieu:I think we, the easy part is as a product guy, I’m really convinced that our usage is really deep. Like we’re starting from a different Lego brick, like, okay, you don’t need it mask or square pixels, you edit like objects. So, I mean, any app that kind of want to copy that Nike that’s to stop doing what it does today.So it’s kind of the thing that relates to the missionary understanding excelled in the beginning. So we were confident. Digging into this usage and this product paradigm and like product basic block is interesting. And then we decided to focus on the pro usage and, and it’s difficult as a follower. You want to serve everyone at the beginning, we were even doing a video plus photo, like in December of 2019, we dropped the video, just for animation.And then we dropped kind off the casual use case to focus on the pro and, and it’s, it’s been helpful. You’re not like giving up on the other users. You, I mean, some of the features, they’re still going to use it, the other, the casual, the people doing memes from, from the app, but she just like when you build features, you think about them.And I, around that, I think YC is helpful because. like if you reach local maximum from one vertical, like product market fit, then you investing so much on the take. It gets better than the, all the local maximums or, or adjustment. Like you can reach them after, and it’s not a big deal and kind of believe and believing and trusting that helps you on, on like a, okay, we’re going to focus on this one for, let’s say three months and we say,00:28:14 Jacob:Yeah. I mean, I think that’s a really good point in that I think can trip up people early in the process is that you think. That making an active choice to close yourself off to part of the market as a mistake. Cause you’re like, well, I want to serve everybody or, well, I want to, you know, I want to have the most broad appeal I can cause it does, it feels wrong, right.To not serve a use case. but often tactically it’s a bad choice because yeah, in the early days, anything. Hey find any users that love your product, even if it’s a small group, there’s, it’s a, it’s a closer step to like, get your foot onto that than it is to try to get sustainability on like mediocre product market fit across the broad market.Because then also it makes, yeah, it makes your McDonald’s discussions easier. Well, maybe you don’t have McDonald’s discussions anymore. It makes your product discussions easier. Cause you can say like, okay, these are pilot. We’re not going to do all this stuff. We’re going to focus on this stuff, which gives you more of a loss city.I just really feel there’s so much to getting that velocity early. Right. Like getting something that’s like moving and growing and getting fast. And I think that’s one of the things, I mean, I don’t know, I won’t, I won’t docks you guys on retention numbers and stuff, but you know, when you have a, I’ll just say that when you have a pro user base, that’s using it for something non casual retention gets easier, right.Like have a reason to come back. And so if you, I mean, there’s not that many apps like that. That on it’s hard, it’s hard, it’s hard. It’s rare to find mobile apps that have that opportunity. Right. So when it’s there, you need to take it00:29:45 Matthieu:Yeah. 00:29:46 David:How do you think about pricing for that value creation? Since, since those that kind of pro segment really probably gets a lot more value than you’re even currently charging. because they’re actually making money with your product. Like how did you think through your print pricing? And did you iterate to this point from a more kind of consumer pricing to them to a, I mean, to me it feels like you’re in the middle still of somewhat consumer-friendly and really honestly, probably cheap for a professional use case.So how did you land on your current price?00:30:24 Matthieu:Yeah, to be honest, it’s like most of the photo apps. I mean, when we started and maybe it’s different, they are all pricing like 10 bucks a month and that’s kind of given by, I guess, Spotify Netflix, like it’s kind of the, the glass ceiling of the price of subscription, even for prosumer. And, and we kind of iterated on the under yearly from 40 bucks to 69 bucks, in, in the U.So we didn’t like, we kind of landed on that quite early. you don’t want to alienate the user, especially if you put the up-selling in the onboarding, like, to be too expensive. I think we have a major opportunity though, to like address the more advanced business and the more than one person in a shop, it’s just, it’s really difficult to build this a B2B case in in-app like, you don’t have that many apps that use that in the up-sell of the phone.So you probably have to show it like. The the first price, to every user and on the pro you probably can to brigade them after, I think it’s something we can do later, like focusing on the product for now and make it simple as much as you’re like, if you start with two prices, like the support, basically it is going to go crazy.We still do the support of the users. That’s something we try to maximize for simplicity here.00:31:37 Jacob:I mean, it’s a good point to make, especially too. It depends on, depends on your cashflow constraints as well. Just like how much, how extractive you want to be, how much you want to push it. Right. because you know, when you have good retention, like there’s an argument, an argument to be made to not mess that up by because you’re raising your price will hurt your attention, right?Like it’s kind of at least on paid, right? Like more expensive. It is. People are going to churn more. and if you’re compounding your total, like paying subscribers, that might be more important and then extracting an extra, an incremental $2 or $10 or whatever from each user, right. It might be better off just to keep them happy and longterm.And that’s what makes it, I don’t know, pricing just so complicated. It’s about finding that equilibrium to maximize like the longterm area under the curve and not just, not just like the individual LTVs.00:32:27 Matthieu:Yeah, exactly. I think there was one. yeah, we, you want to talk to, like, you don’t want to. Expensive at the beginning, you should have too expensive. Like one of the really source of feedback was also our support. And like, if you’re too expensive, you get less pro. And the goal, I mean, the reason we launched after two weeks with was like the feedback from process so much more valuable than the feedback from, for users.I mean, you still want people to pay, like, just stop at 500 bucks in long month is going to be like, there’s no way people are going to pay for that. So, and I was actually talking on Twitter that like, we actually put forth first a monthly plan because we wanted people to churn and be able to talk to them.So there was really a focus on learning from the 00:33:07 Jacob:Interesting. 00:33:08 Matthieu:Early days.00:33:09 Jacob:Yeah, I’ve always. Yeah. The, the short, I think, long, the annual subscriptions obviously have a bunch of benefits to, to, to app developers, but you do end up flying blind for a very long time. Right. Until you really know what those numbers look like. So if you’re on monthly, purely, it does kind of simplify things early on.Which is another case to be made for just not over thinking your pricing, like initially, right? Like you guys launched just with the monthly and it was fine that you added, I don’t know when you added an annual product, but you brought it in when the time. 00:33:40 Matthieu:I think the logical, so learning from GoPro and replay days is the pricing is quite elastic. So you double your price, you divide by two, the number of pros like minus plus 10%. And so, so it doesn’t, I mean, it’s, I mean, when you get bigger, it’s way of doing experiments on pricing, but in the early days it’s worth, it’s not worth like taking too much time on that.00:34:01 Jacob:Yeah. I mean, it’s good to know if you have an elastic curve, it means you’re pretty close to, to the optimum already, right?00:34:06 David:Did you start from day one at that $10 a month price point?00:34:10 Matthieu:I think we were at eight or nine. it’s pretty much like every pro for the pro apps. Like not selfies was at that on the photo and it’s, and I think. The co, I mean, it goes from Spotify on Netflix. Like, everyone’s like a, it’s like if comparing industry report, they tell you a comparing you to Spotify on that fixed anyway.So it’s a, I think it’s a good, like a way to start on as they increase the price, they increase kind of the time of all the possible ATV of all the apps, which is really good. Thank you.00:34:40 Jacob:If they don’t take care of it, inflation will don’t worry. 00:34:43 David:But, but that’s just amazing two weeks, to an MVP that you could charge $8 a month for, and people actually paid it.00:34:50 Jacob:Well, 12, 12 years in two weeks, David, if00:34:52 David:Well, right, right, right. No, no, that’s a great point. But the point being that there, there are still opportunities that when you have experience and domain knowledge, that it’s not the, the programming, it’s not the, it’s not such a monumental task to build something that’s really valuable to people in this space on mobile, that you can build something good quickly with that experience.00:35:17 Matthieu:The first app was really crappy though. Like I think we 00:35:20 David:Yeah. 00:35:21 Matthieu:A few weeks before having our pay first paid users.00:35:23 David:Gotcha. I did want to talk a little bit about your marketing, so, What did you do at launch? Did, did you get a little pressed? Did you, you know, talk to apple, how did you get that initial code?00:35:35 Matthieu:So yeah, we were super, I mean, apple has been super supportive to us. I think. Before GoPro, GoPro acquired replay. so we play was, app of the year, senior as, elevate. So 00:35:46 Jacob:You guys at the year in France, is that what the00:35:48 Matthieu:No, so so I have a card, I brought the screenshot that, 00:35:52 Jacob:The U S 00:35:53 Matthieu:So we didn’t, yeah, we didn’t, get the U S we didn’t get the U S and north America, and it’s kind of a private, taser, but it’s, we got like most of the Europe and Asia. And, yeah, and then I was seeing like the star that elevate their they’re thinking the other U S and we should get that. 00:36:14 Jacob:It was good for you that we hadn’t localized maybe 00:36:18 Matthieu:Yeah, 00:36:19 Jacob:That was the thing we were like only English at the time.00:36:22 Matthieu:Well, elevate is such a difficult business to localize. So I think it’s a photo video is easy to localize it. Yeah.And, and so we got like, we got the keynote, so, and we kind of, I mean, the app is really good at marketing. using the latest technology of, apple in, like the metal and using the lasers, the GPU, I kind of build a relationship from there, with the apple team and also like learning AR that’s kind of the narrative of apple, like to showcase apps.Leveraging the latest technology. They do their marketing through developers and that’s awesome for us. Like it’s super opportunity. And so what was that? When we started, it was well, we’re using a Carmel to do the background removal and we did use like really early on in September of 2019, we use our KPIs to remove the background, to do some live preview of the photo.And so we got into, there is an accelerator inference in the biggest, like sexual life is one of the biggest things. Accenture and apple has a program there and we got in there and they helped us and like marketing and, and business, during the summer. And we had some tech workshop and in September we got Macy’s, marketing from the using Eric.He, three, I think, API APIs. So I think all the days was marketing through, using the latest tech software and hardware from.00:37:42 David:And where did it go from there? Yeah. So after, after you’ve, you’ve gotten some traction in some of those early customers. did you jump into paid user acquisition 00:37:52 Matthieu:No. 00:37:54 David:Of, of, paid to, organic growth?00:37:58 Matthieu:Yeah. So we got into, we didn’t do paid until like, we really got traction and market fit. So early 20, 20, and we started to have some, we got Gary V tweeting about us, like a video, farmer. So that was like a viral video demoing the app. And we kind of, I mean, the thinking was if some videos of demoing for term or viral, it probably works so-so as ad.So we kind of use these viral videos and try ads on that. Started ramping up, I think before YC, Facebook ads. So in April of last year and, it kind of, yeah, it was a good, channel of acquisition for us. And we always had in mind, like, we don’t want to spend too much, we wanted to have it under control, but the payback was really good.So we kind of, added mix like, I don’t know, it was three 17, maybe at that point in between the, between paid 30% beta and the 70%. And, yeah, organic and so that we ramped that up and I think it wasn’t a good time to all this marketing and we kind of fast in that, at that point, because there was a COVID, the beginning of the COVID and all marketing was going down.So it was super cheap to try stuff there. 00:39:09 David:Yeah. 00:39:09 Matthieu:So I tried to be a part of these tick on that an influencer. I like a lot of times. So like all of that, we were at the right time and at the right moment for that day,00:39:17 Jacob:So how much, like are you balancing? I mean, obviously there’s always so much you’re balancing as a founder. but you know, how much are you thinking about investing back in the app and like broadening your appeal, making it better new markets, like new platforms versus. The scale of approach, like how can we scale marketing and, and continue to grow?Or is it like 50, 50? Like, do you have a top priority right now? Or, or how has the, like, how has your, your mind thinking about like your biggest growth levers?00:39:48 Matthieu:Yeah, we try to try to have a higher, level kind of privacy laws. So let’s focus on retention or let’s focus on this specific kind of users. So, in the U S for just three months, and we tried to align product and growth, on like a three months of that. And so that’s kind of. that’s yeah, that’s how we think about it with Elliot and, and try to have it on growth and on product and kind of put us to talk more to these kinds of users, so to improve on, on these kind of shoes or just, just niche for instance.And, I don’t know if people are selling on this marketplace for a month and then we’ll see maybe another nation, another country, but still improve the experience for everyone.00:40:29 Jacob:And are you thinking about marketing in terms of like specific people selling on specifics, like marketplaces, like the you’re actually going like channel by channel that, that, that, that closely. And does that inform like features or does that inform creative or how does that feed back into your part?00:40:44 Matthieu:Yeah, we’re good. We’re getting into that. Like we tried to understand bearer by a persona use case. What’s the LTV and what’s the retention is, and I think we are at the scale where we start to do that, but before it was like a general, a general creative for everyone and kind of demo the value of the app.And we were super lucky that our creative we’re working for them. And I think like now, like the way marketing works, it’s, like a. Facebook or Google are doing most of the optimization and you’re more into like, what can I add up my creative so that it fit the focus I want to do for it. I don’t know if the U S so I’ll be a make sure you’re in English.I’ll make sure if you’re like looking at multiple countries, try not to be too localize. I think there is a Netflix called neutralize, or they have a specific wording on making the, the artwork or the creative, not to localized, not to English, for instance. Okay. So you just content that’s good. So it’s kind of, that dictate kind of what we try to do with growth and marketing.00:41:39 David:That’s great. Well, I have a million more questions, but we do need to, to wrap up. We’re going to put links into the show notes to find you on Twitter and LinkedIn and, and PhotoRoom is such a great name, easy to Google, easy to find on the App Store. but you’re also hiring, what, what positions do you have open?00:42:02 Matthieu:We’re hiring a lot. We’re hiring on growth and paid acquisition, hiring project designer, iOS developer, Android developer. And the way we think about the team is really to have a, like, we are 10 people, and we have a strong impact to millions of users. So, really leveraged like a small team, high impact.I think it’s possible because of apps. So, we’re looking for really senior people for that, and mostly in Europe. So we have like a, two, three days a month, in the Paris HQ, but, you can work from anywhere in Europe.00:42:35 Jacob:Yeah. And I’ll, I’ll second that. I think working on this product would be really interesting. Purely based on my insider knowledge as an investor and your friend, but for real, I mean, a lot of apps don’t, you know, get to the point you have. You’ve got a lot of tailwinds and I think actually, the upsides are go far beyond the App Store.The future is very, very, very big. And you guys are ambitious. So take these jobs. Thank you.00:43:02 David:Yeah. 00:43:03 Matthieu:Yeah. We were thinking be everywhere. We stopped for a while, but we were like mobile first, not mobile only. And we have the web app web tool that we launched last week. We have an API for any developer that wants to remove the background. We have photo and attribution, and have the module folks using it.So it’s really, I think we want to be close to the entrepreneurs, and we want to communicate through pro images that sell. And so sometimes it’s not an app, it’s just a photo and button. And so you can use the API for that. So, yeah. 00:43:33 Jacob:It’s pretty great when you have a good product market fit, it just gets really fun. 00:43:37 Matthieu:Yeah. And we have that kind of, now that we have money, we kind of, we have like super smart people on the machinery team. So, we have the best thing on the market to do that. And that’s super exciting. Now we’re shipping new machinery next, I think next week. And it’s going to be awesome. I can’t wait to see the result on the analytics.00:43:52 David:That’s amazing and 10 people. I thought you were bigger. I guess you want to be, you want to be, 15 or 20 with all the postings you have. 00:44:01 Jacob:That’s why I’m really bullish on this market, David.00:44:04 Matthieu:Yeah. 00:44:04 David:Yeah, 00:44:05 Jacob:A small team can do a lot of stuff in this space. It’s crazy.00:44:07 Matthieu:Yeah, It’s00:44:08 David:It is crazy. Well, thank you so much for being on the podcast. It was great chatting, and thanks for sharing your insights, Matt. 00:44:13 Jacob:Yeah. We’ll have to catch up again in two years to see how, see how it’s going. 00:44:17 Matthieu:Yeah, of course. With pleasure. Thank you guys.
  • Sub Club podcast

    Apple’s App Store Conundrum — Ben Thompson, Stratechery

    1:27:25

    On the podcast, we talk with Ben about all things app stores. From Apple’s revolutionary launch of the App Store in 2008 to the monopoly-like powers both Google and Apple now wield today. With multiple lawsuits filed, government investigations ongoing, and developer sentiment at an all-time low, we take an honest look at the challenges and trade-offs in trying to bring two of the world’s largest companies to heel.Ben Thompson's Links Stratechery Ben’s Twitter: @benthompson Follow Us:David Barnard: https://twitter.com/drbarnardJacob Eiting: https://twitter.com/jeitingRevenueCat: https://twitter.com/RevenueCatSub Club: https://twitter.com/SubClubHQ
  • Sub Club podcast

    How Apple’s App Tracking Transparency Affects Developers — Shamanth Rao, RocketShip HQ

    48:15

    Watch the video version of this show on YouTube »Shamanth Rao is the founder and CEO at Rocketship HQ. Shamanth also hosts the Mobile User Acquisition Show podcast, and is the lead instructor for the Mobile Growth Lab workshop series.RocketShip HQ is a boutique growth marketing firm with 8 figures in managed spend. Before founding RocketshipHQ, Shamanth led growth marketing resulting in 3 exits: Bash Gaming (sold for $170mm), Puzzle Social (acquired by Zynga), and FreshPlanet (acquired by Gameloft). Shamanth has also helped many other mobile apps grow and scale.Shamanth is passionate about teaching and sharing everything he’s learned about mobile growth. Much of his time and energy goes into the Mobile User Acquisition Show. Shamanth strives to ensure that the wisdom he’s gained reaches as many people as possible.In this episode, you’ll learn: The history of user acquisition and algorithmic targeting How Apple’s AppTrackingTransparency has shifted users to Android What Apple’s new tracking policy means for developers Are subscription apps impacted more than other apps by Apple’s tracking policy? Links & Resources A Brief History of App Store Monetization episode – with David Barnard A Brief History of Device Identification episode – with David Philippson iOS 14 & IDFA Deprecation How App Marketers Must Adapt - YouTube Shamanth Rao’s Links RocketShip HQ’s website The Mobile User Acquisition Show Mobile Growth Lab Follow Shamanth on Twitter Shamanth Rao’s website Follow us on Twitter: David Barnard Jacob Eiting RevenueCat Sub Club Episode TranscriptShamanth: 00:00:00The more signal you give to the algorithm, the better the algorithm performs, right? You know, in the post AppTrackingTransparency world, if you gain more purchases, the better the algorithm performs, obviously that would take purchases from you and everybody in the world, and it would just do better. Now, obviously it’s just taking your trial and doing much, much better.David: 00:00:38Welcome to the sub club podcast. I’m your host, David Bernard, and with me as always Jacob Eiting.Hello Jacob.Jacob: 00:00:45David, glad to be here with you, as always. David: 00:00:48Our guest today is Shamanth Rao, founder and CEO at RocketShip HQ, of the podcast Mobile User Acquisition Show, and lead instructor at the workshop series Mobile Growth. Shamanth’s company, RocketShip HQ is a boutique growth marketing agency with eight figures in managed spend. Prior to founding RocketShip HQ Shamanth growth marketing, to three exits. Hey Shamanth.Welcome to the podcast. Shamanth: 00:01:16Honored to be here. Thank you for having me, David and Jacob.David: 00:01:19Yeah. So, I wanted to start with a little bit of a history lesson. You’ve been in mobile advertising and working on mobile apps for, since very early. So, could you take just a couple of minutes and step us through the history of kind of what led us to today with app tracking transparency, and all the different ups and downs and changes that have happened over the past?Shamanth: 00:01:48Yeah. There’s been a lot of ups and downs, as you said. I see two overarching trends, but for folks who want to go into the weeds, I would actually recommend two podcast episodes. One was mine with you, David. A brief history of App Store monetization. You provide a very great perspective into how the App Store itself has changed over the years.The other one was an interview I did with David Phillips, A Brief History of Device Identification You know, we are all about brief histories, but, I think to what we talking about ATT and how essentially disrupted growth in today. There have been two forces that have led up to this point, the last decade or so I think it’s important to know and understand both of these, just to know how we got here and why it’s important, right.Because ATT just did not happen overnight. There were signs for a decade. And, you know, I think obviously a lot of this is evident in retrospect. but I think it’s helpful to know and understand what those breadcrumbs were.Trend number one has been increasing accumulation of particular data platforms over the last decade.You know, I remember, you know, David, as you pointed out, I am a really old person who, which around then, but we don’t advertise. It took off, with all this gray hair. But you know, when I started that we were doing CPC buys, CPM buys. I started doing mobile advertising before Facebook even had mobile ads, app ads.There is no conversion tracking. you know, I give it like no conversion tracking. If you, would buy installs, and you’re like, oh, we bought 70 stops. We got so many touches that we are profitable and spent like millions on games the time. And suddenly the level of sophistication that emerged in mobile advertising. I don’t think we could have posted in 12, 20 13, 20 14. But like I said, from the TPC buys gradually they have a CPI buys as ad networks that now are billion dollar companies. And so it’s an app love and have a tiny ad networks at the time.A lot of others basically fell out of the side. know, they, they like, we have enough confidence to be able to build. Rather than just a or impression we have that kind of data, that kind of confidence the next time AEO or purchase optimization. This is 2016, right?It’s just, it seems so recent. And it’s staggering to think that they could not optimize like athletes if they six, years ago. And that was just the biggest game changer in it. I still remember having a lot of skepticism that this would even work and I’m like, how are they going to find out who’s going to purchase?They’ve never done it, nobody’s done it. But clearly, if somebody could do it as a Facebook, they had the budget for data. I can only to that point the time I think it became evident to me, myself, that as to why Facebook was so successful. basically have the IDFA that IDFA on Google ID.They had that idea, with print from on Facebook audience network. So for diva able to predict with ed accuracy, who the purchaser’s book, obviously they took it a step further with relapse optimization, So obviously the more data Facebook’s SDK gun. The better it got predicting who the purchaser as well.Obviously more data the pixels on the web got the better, the better the accuracy of the SDK became other way around that, because they had, you know, if you made a purchase on a beauty of that site, you would make a purchase on, an e-commerce app. So they put all of that data together.Right? So obviously Google had a very, very similar trajectory. I don’t want to go too much into the weeds. Over the last decade, increasing amount of data accumulated by Facebook, by Google folks like apple. And then I am so all add Netflix, everybody got increasing amount of data about users, spectator. they just, weren’t doing this in isolation, apple licensed up to this, you know, Google, Google had a bit of a conflict because they were also making money off of this.They are also making money off of this. these less active in pushing back, but you know, apple, the apple, again, not to go too much into the weeds that it’s corporate strategy. Two, but for apple to say a hobby, a privacy minded, but it’s also very, very much about profits for them. the opera motive.Oh, an ad network. No, I don’t know. I don’t have a lot of confidence to how they would do anything. Right. So apple said, know, look, we have this beauty ID, which is not great. Let’s phase it out. Let’s have an IDFA, which is reset the vote, which wasn’t too much and improvement. they said, oh, let’s make this, idea phase zero, but physio, which means how to use it goes on and off the lab.idea of it becomes and advertisers could not cannot target people. Shockingly enough, to idea, phase zero, which was, I think 2016. But if I use it on the flat adjustment advertises, please don’t track the fuse. It’s almost like a request. a non enforceable requests, basically needs to attract me, but nobody can, anyway, so even lab Vito was a very, very telltale sign that this is ATD is, where apple is headed.And if you have to look on the web, safari had intelligent tracking prevention. They have obviously. Much more active on the web terms of crackdowns, Mozilla had what what’s called ETP. I think it’s called it should tracking prevention. I forget what it’s called, then Chrome of course said, Hey, we’re going to deprecate They’ve accepted the deadline, but been a lot going on in the direction of privacy. Right. and that, has happened very, very much in parallel that increasing accumulation of data by. And to some extent, you know, it’s having these surprises for anyone who’s followed the breadcrumbs, not to gone to zero and 2018.Apple said kid stops will not allow tracking. That was almost like a trial balloon bar and of cost 2020. It was not unsurprising, I would say, right. That, it came to be just because of everything over the last decade that I just did.David: 00:09:21Yeah.That’s a really great way to summarize it is those two parallel courses with it’s like in the shadows, there was like more and more and more and more, more data accumulation feeding all of this, but simultaneously there was more and more and more awareness of privacy concerns.What that data was being used for, and that, you know, it does seem like the press a big influence in this. I mean, when was in New York times and wall street journal, both had big posts in like 2017, 2018, where they showed, you know, how you could track individual users when they’re going to, you know, a certain medical clinic or, there was another set of stories around us service members who were being tracked by fitness apps. revealing, basic, we call unknown previously unknown, military installations and things like that. So it, it, yeah, there was a lot going on that has led us to this point. So. So now apple has, has dropped the ball after acting transparency. You know, you you’re, you’re, you’re not allowed to track unless you first prompt.You know, we could, we could talk an hour on all the different motivations and the, and even the way they deliver it, you know, the, the way they. Request the prompt is, is, and the wording of the prompt it has, has even drawn controversy, but let’s not get into that.Jacob: 00:10:52Time it comes up, I still don’t know what to click, David: 00:10:57Let’s talk about the real world impacts because I think there’s been a lot of ink spilled in a lot of discussions around, those other things. But, but what I want to hear from you as someone who manages a ton of spandex and works in the industry and, and has to deal with this day in day out.Let’s talk through the world impacts of, of, of how this is impacting the apps that you work with and what you’ve seen kind of in the broader industry. I thought it was interesting before we jumped on the, on the, and started recording, you actually said, you were expecting a crazier summer, so let’s just start with that.So you’re not quite seeing the disruption you initially expected. Is that, am I over reading that.Shamanth: 00:11:42I don’t want to be grand standing here, but I certainly was for worse. and I don’t want to jinx this, but suddenly that couple of advertisers really all right, that actually crying.But I talk about the mechanics that may have contributed to that further on, but, I certainly was prepared for far, far, far worse.I would say.David: 00:12:07Yeah. So, so what are you seeing? I mean,Shamanth: 00:12:10Yeah. David: 00:12:10And then one of the things you you’ve mentioned before is that you are seeing some shift to Android. Tell me about that, shift to Android spend. And is that in certain categories across the board? Shamanth: 00:12:21I think it’s across the board. I think it’s much more so in gaming. and if you look at a bunch of MMP boats or the estimates, the, shift to about iOS. Yeah, about 30 to 40%. I think that sounds like a realistic range. Obviously there’s some verticals that are hit much, much harder, right. yeah.Definitely. I think there’s a lot of sped shifting to ad drive. I would attribute some of that to the fact that. Tracking is broken, but you know, oh, I hate to see a, this, like a mother spoke to the work with, and the, also the advice and I’ve just stopped you. You’re like, oh my God. My CPA is a boated by Facebook is terrible because Facebook’s not tracking anything.And then when we look at the blended numbers, Basically the money they make and the trials to get and the subscriptions get, which is exactly what I mean by it. Not being as as I expected. You know, look at the iTunes dashboards,Just go crashing down, which is what I was afraid would happen. Right. and that, that has not happened. but what is real and true is like I said, tracking is broken, even if not right. I’m tracking to just grow congested because apple has a concept of privacy threshold. which basically means, if, campaign.Does not have minimum number of stops or purchases. Apple is going to show they report all installed. But, but the report very few purchases. What that means is you are a casual game, our social casino app that has Costco, set it up 150 to $200, is not uncommon for these. each campaign, if you’re running $500 a day per campaign, you get two patches.So for people, campaign would just get obfuscated by the privacy threshold, which means if you’re going to find a dollar at a campaign, you’ll probably get it, but you’re just not seeing them, which is better than a was that I’m not.David: 00:14:53Yeah, we We, are we back to the old days of, of half your advertising budget is working. You just don’t know which half Shamanth: 00:15:01Yeah. Yeah, yeah, yeah. Very much true.Jacob: 00:15:05I was going to ask, so the pull back on the spend, like, is that, do you know where that’s coming from along the chain? Is that, is that companies not being sure anymore and pulling back? Is it, is it agencies? Is it all long? Because at some point somebody has to, because I, it makes sense that like, one, we don’t know how effective all this stuff was to begin with.Right. And so just losing the tracking doesn’t necessarily mean it’s less effective. It just means we don’t know. And so it seems a little foolhardy to just dial back. Right. you know, especially if your business relies on it, but it seems like that’s what most, at least some percentage of companies have done.They’ve they’ve pulled back just because they’re not sure.Shamanth: 00:15:44Yeah.I think I would also say a lot of companies that have pulled back have had strong drive products. the couple of companies that I know that are doing better now, actually don’t have very strong, I drive products. We don’t have a choice, right? We don’t have a choice. I obviously I don’t fly that strong guy, but having a fall back means be good to take a little bit easy most time to Android.We figured out what is going on you get to your question. I think a lot of that’s coming from companies, especially larger established companies that have. BI teams and reporting systems and dashboards on the creative level alive. We just don’t have that in our book anymore. Jacob: 00:16:38And they’re spending too much to be confident in just YoloShamanth: 00:16:41Yeah, yeah, yeah, yeah, Yeah, yeah, David: 00:16:44Any specific trends on, on CPMs and cross portrayal or anything like that? As far as with the drop-in. Spend on iOS and the increase on Android has some of the performance on Iowa’s not degrading been more to do with market dynamics change versus it actually just working as efficient.Shamanth: 00:17:07Yeah. you know, I try not to look at CPMs just because CPMs are very contingent on the kind of optimization you have to like, you know, and may, if you had value optimization, you be paying QPM segment to their roof and your CPMs on audio sense. I couldn’t be higher than Instagram and Facebook and the metric.What I like to look at is really the CPA, but there’s a cost, but. also has the capacity because of the privacy, especially for nowDavid: 00:17:41Right. Shamanth: 00:17:41Cost per trial, which I see being steady. Now to your question to your underlying question about, do I attribute back to the underlying market dynamics?Definitely. I think that the fact that there’s less of competition, I do think has contributed to, the TPA being steady folks that have continued to do iOS. Definitely. I do think that the lesser competition has pleaded. David: 00:18:06That makes sense. let’s talk a little bit, cause this is kind of our wheelhouse at, remedy CA obviously, nice shirt by the way, Jacob. Jacob: 00:18:16Is the original first ever revenue cat t-shirtDavid: 00:18:19Nice. how, how are subscription apps being impacted in, in what you’ve seen and then how is that different from, you know, games and other categories that you’re working. Shamanth: 00:18:31Yeah. I would say subscription apps are hit much, much less odd than. A lot of games, again, I’m qualify. I don’t want to sound like I’m grand standing because this is not like a body of Fiesta yet, but I think they’re it better than folks who are really clear that I don’t want to say clueless, but folks who are just struggling, you know, I talked about, you know, let’s just say a hypothetical casual game or a social casino app that has a cost, the big user 150, if you get killed by the privacy test, short subscription app less impacted by that. just because, you know, again, you’re off book which is a primary metric, nearly every subscription app, a squat Cheverly under $50, which means for the same $500 budget you getting, you get, you’re getting 10 purchases.So. Deceptive as are that privacy threshold. Right. and the other factor that makes the whole ATD tank a lot easier for subscription naps is that nearly every subscription app, I know have 90%, lots of trials happen within the first 24 hours of install. What that means that in the ATP paradigm is A lot, not nearly all of that signal gets captured by the ATT algorithm, by a scab because a scab network workshop with system of timers, right. immediately after install a timer starts and after 54 Davos the timer reset, if y’all, and then the reset of the starts and, if no event has happened in that second time, A lot of the events that have happened first, get sent back to the, get sent back to APO.Not that event gets sent by them. And I’m probably definitely grossly simplifying the, some of this. and, I have a YouTube video that goes into the distance with the V2. People can check that out, but my point being the fact that of the trucks nearly all the trials happened within the first 24 hours.Make it relatively easier for our subscription apps to have to be captured by ad network. that’s one of the reasons, lack of trust snaps do quite and obviously, you know, the most signal you give to the aggregate them, the better the I that is in bombs, right. you know, in the P PhET was if you gave most budgets, The better that I go to them, but obviously the algorithm would take you and everybody else that it would just do better.Now, obviously it’s just taking your trial and doing much, much better. add onto the trend we’ve seen is that VAT based flows work a lot better for subscription apps than for games. again, there are challenges in execution, certainly. One of the things that they’ve seen that allows them relatively most after doing doc, that based lotion.Right. yeah, so I, I would say those are some of the factors that think contribute to subscription apps being better off than games and the post ATT world. again, not to grandstand, not to the, victory yet, but I think that that much, much better.Jacob: 00:22:14Yeah. There’s, there’s still, also just the dynamic with consumable games. Like, I don’t know what retention curves really look like and stuff like this, but with subscriptions, you know, your acquisitions you’re making today only effect, you know, a chunk of your revenue in the very short term versus, and you have this like recurring user base consumables.If your new users dry out really fast, like suddenly, you suddenly lost a lot of. Yeah. A lot of them, your business model doesn’t work as well. Right. So, but wow, that’s incredible that the, so on the CPIs, for like social casinos or whatever, which I imagine is just thought a high spend category, highly competitive space.So if they don’t have like value attribution, What sexually driving the CPI so high? Like how do they know like what users to spend that much money on? Is it just, is it just, I guess click-based like, it is still like they can, they can proxy and know like people that click on those are part of that high value group or, or what, what, what keeps the, keeps the targeting good enough so that, you know, cause you can imagine if everything was perfectly anonymous, all CPAs would clicks would be the same, right.Across all apps.Shamanth: 00:23:21Yeah, yeah, yeah, At this point, I don’t, would not say if you have a perfect answer or apps with high CPA, I think the best we have right now is true. Facebook reports, metrics, health platform reported metrics that directional, which means your CPA today would not be comparable to your page 80 TCPA, but because it’s going to be very, very high, just because of the privacy picture that I just described, if you are getting maybe $500 on this 700 on that, that you just input campaign is better than campaign.But you’re not impairing that job. That is your actual cost acquisition. So you’re taking the CPA as a relative measure. I think that’s true for the game it is for subscription apps. You’re treating the CPA as a relative measure cabinet and campaign B or not so much as an absolute measure of unit economic.David: 00:24:20I think that’s a great to transition into what’s actually working right now. So we’re talking about some of the impacts, but, Hinting at it’s something that you’ve mentioned before, is that the best source of truth now is not. These specific return on ad spend calculation, but actually using blended metrics.So tell me a little bit about how, how you approach thinking about metrics as a source of truth versus, you know, the past, you know, five or six years where it’s way more focused on. very detailed return on ad spend. And again, to our earlier point, even if that return on ad spend calculation, wasn’t actually as accurate as it seemed, Jacob: 00:25:07Okay David: 00:25:08You were at least able to calculate it more accurately.Now it’s like kinda everything’s out the window. how are you approaching blended spend or blended metrics, to measure these things?Shamanth: 00:25:20Yeah, I would add the caveat that the blended metrics isn’t like modern on you. Right? What old school? Offline advertising work. They were like, oh, this is how much I spend. This is how much I made, how they measured everything before the internet. And even with the internet, like of companies, we work.Even three ATT works at blended metrics because we know that a portion of our paid installs drive organics, we have a very, very clear correlation between updated organic. So we would be money on the table if we took into a concept paid users and not organics. So, you know, people have definitely done that.And that companies that have done it just to pursue growth. they’re like, look, we need to grow as aggressively as possible. And the way to do that is to take lead and metrics to justify the growth rather than to shackle us. Jeff Pedro lab, back to your question. How, how how do we sort of look at this names will say, this campaign gave us, return on ad spend 20% cost per trial of $30.You’re basically saying your overall marketing spent, gave you a $20 cost per trial across paid and organic and social and that you’re spending on. Obviously, a lot of people to be uncomfortable with that because they’re like, oh no, if I hadn’t spent on marketing, I would have still gotten trials a day.And I’m giving credit to marketing for that. And, you know, I, I don’t have a direct answer to that, but I think the answer really is. Would you want to be, would you want that’s helpful and has to get crew or would you. And model that’s accurate, but isn’t having you grow. not going to claim I have an answer to that one, but, yeah.So basically looking at your total number of trials and your total spend. obviously this calculation becomes scarier. you have multiple chats, Yeah. If you’re running Google, Facebook snap, and multiple ad networks, then you’re like, oh, you know, one of the ad networks probably performed badly, but my total blender not change all that much because my other channels, 10% of time stops, but there are challenges, especially at collage level spend, but is very solid source of truth, especially for smaller advertisers who may be on a handful of channels.Here, I guess it’s what you see in the back. David: 00:28:19And, you also mentioned that, people, do you, you mentioned web flows are working really well. And I assume what you meant by that is sending people from an ad into, onto the web instead of onto the app store, which is, it’s really fascinating to me on multiple levels because. You know, the app stores have always been this black box where you put a certain number of, of clicks into it.Then, you know, you see the end result, but you don’t see any of the steps in between. I mean, you have some basic metrics with app store, analytics and stuff. but with the web, I would imagine that that gives you a more direct. Trackable, link from somebody who, sees an ad to then actually kind of what they’re doing on your website.So, but then ultimately I’ve talked to a lot of developers who talk about how on the web, their conversions are actually quite a bit lower in the app because Apple’s made it so easy to use an app purchase. So, but it seems like maybe there is somewhat of a balance. There is that maybe you lose fewer people.From having to jump through those hoops of the app before they even get to the onboarding before they can be shown, you know, the value proposition and then being, you know, shown a subscription, page or whatever it is. what have you seen working in regard to web flows and then, and specifically for subscription? Shamanth: 00:29:53Yeah. Yeah. Yeah. Like I said, I’ve certainly seen a lot of success bar description apps that have adopted web most, a couple of apps have up 15 month on month group to ATT. not to have typical, revert, but it’s that’s happened. I think a couple of elements, you know, I think it’s, what’s most important is to make sure that it’s right and there’s a couple of possible lows.I think it’s important to pick to which one is right. And really, and I think one flow could be showing that. A user goes to a landing page, which is basically like a B2B ought to be, to see that the page on the web and what you would get for a And you have a link that accept call to call to action on the landing pages, go to the app store.So a lot of that experience, but just, and try to explain it’s happens on the app store, the web page. I actually does the job of telling the user on the product. And it’s my hypothesis that this actually works well because Yvette page can do a much, much better job of selling than the app store can, while still making it clear that this is an app, and while actual conversion happens within the app itself, but, similar, a different flow that’s very comparable would be take an ad, take a user from an ad to a landing page where users have to input that.Which again, get, use, it makes it makes it clear to the user that this is an app. is a mobile experience. User gets a text message and use assigned top work. and when they click on the text message, get to go to the app store and download the app. Right. Again, another model could be a user clicks on an ad, to an article or a content page, which is what you would see if you had a Double-A or a printed article or a content page to not store.And I can, the last one I can do, the more complex no is just to have onboard them on the web. basically take them to a webpage and they And, hopefully so I can make the purchase on the web. It mitigates your favorite petty, to be honest, the hottest and most strict food resource intensive.And really it’s my recommendation that you put you that back after you put you in one of the best that I recommended, because you don’t want to invest a kind of engineering and development time and bending, don’t even know that the flow is going to work for you. so I would recommend just testing the web landing pages first then onboarding stuff.But, I think those are most important models that we see work. Somebody else. I think that’s also very, very critical. think a lot of people, when they look at a lot of advertisers, I know that have started on the web for the first time. We’re like, oh, Put together this nice landing page that looks like our homepage, on our website and just put it out there.Okay.Let’s, you’re being very intentional about what value propositions to touch on Actually out of your landing page. And we have a structure that we use now. most important, part and value proposition and that’s social proof then your most important emotional benefits then. I think the most successful advertisers we work with are very, very intentional about what that, that page is looking like.And they also tested their athlete. I think it elements are very, very critical to making theDavid: 00:33:59Yeah.That’s really smart. And I hadn’t thought of it quite that way about how, yeah. And that was, I was talking with the apps are being the black box is you’re just sending somebody, hoping they look at the screenshots, hoping the icon resonates with them, hoping the title and subtitle are meaningful, but when you send them to the web, it’s not just about them right.To subscribe on the web, but it’s actually just. Having a better opportunity to communicate the value prop so that by the time they get to the app store, they are, they have a much higher, They have a higher, they’re just more likely to actually take action by the time they do get to the app store.Does that makes a lot of sense?Jacob: 00:34:39Tells you a lot about the quality of like the app store as a sales pitch. Right? I mean, but I guess when you’re like looking at a, you know, you’re trying to differentiate, right, and there’s only so much, you can communicate in a block of text and then a bunch of screenshots. Right. And you’ve seen so much.Data shoved into the screenshots on asking LAMSTAR right. They’re not screenshots. Right. They’re like deck.David: 00:35:00Billboards Shamanth: 00:35:01Yeah.Yeah. I also think another reason why the app store works so well, pre with Facebook would just show ads to users to install other subscription apps. So if you send them directly to the after, they’re almost pretty qualified. case anymore. So I think that absolutely level the field a lot.Jacob: 00:35:27Yeah.It’s, it’s, it’s a tough, skill set though, for a lot of developers because they don’t often have web experience internally. I think, I think I’m, I hear so much, like people get so obsessed about the 30%. and they want to jump straight to that last one. You mentioned about building a whole online purchasing thing, which like, you know, Stripe’s pretty easy to use.Like it’s, it’s, you know, it’s not that much more work than building a landing page, but you have to remember. okay. Management. So now you got to have a link for somebody who can go and cancel that thing. Now you also have to worry about taxes, Stripe. Doesn’t like collect a tax information for you already.You have to, you know, then synchronize that with your backend. And, you know, if you’re using revenue, casing grants with us or whatever, but you got to manage all that too. a lot of complexity, for 30%. Right. And when you’re just trying to, you know, all of these things can find incremental. But like, as you’re saying, it’s important to put them in the right order or you can end up a lot of and money.Shamanth: 00:36:28Yeah, yeah. David: 00:36:30Well, I did want to, to move on to the, the, future. So we, we’ve kind of gotten through the first couple of months of these, this rough patch in or into this, era of, of mobile advertising. Are there any things that you’re seeing that are especially promising. the future is the future.Everything we’ve been discussing so far of just of your advertising works and 50% doesn’t mean you’re never going to know which, do you, or are there some technologies coming online or some approaches that are just going to take time to of work out.Shamanth: 00:37:12Yeah, I think there’s going to be some changes. I don’t know. These are going to be shattering, in terms of changing. ATP. I think the most promising though, I would say, iOS 15 custom product pages, basically solve the problem of Jacob. didn’t give it to you. How one tomorrow slide deck and everybody sees the same tag and Astro does a terrible job of sending a user on.What the product is basically, the custom product pages can have up to 25 washes off your app store. which means like if you’re a, you know, wellness app, if let’s just say you’re a meditation app that has a meditation for sleep or anxiety and how to meditate. Separate landing page, so to speak on the app store, anxiety, meditation, right.And you can send, get a unique URL for each of these. you’re going to have ad for sleep, going to an app store for each sleep for anxiety going to an app. So for anxiety I can, that can help. I just don’t think it’s going to have too much on the measurement front. obviously.Actual execution is still unclear. The announcements out. Definitely one of the big changes I would take that’s coming with 15. The other one would just be that, advertisers are going to be receiving post-docs, which is huge, at least in ensuring of the advertising data so far, completely bonkers right now.Networks like Facebook snap, everybody get your post back from ASCAP network, but you have advertiser you as an advertiser. Which means you basically take the word for it. I do know for a fact that has actually changed values. I don’t want to call it malicious because the conversion value was no.And to change it to zero, the problem is that knowledge will have very, very different meanings. You don’t mean install. not mean to install happen, and there’s no value. know that they did that change. I don’t have that company to do it. but my point is, and Google, Google explicitly say we are going to use model conversion.So you basically take out what bird app Facebook face tapping data is accurate. Everything underneath it’s modeled, means take out all of this is because the postdoc goes to the metroplex, but not the avatar. if the post that goes to the advertiser, you can add the very least verified that tell me the truth, which bonkers? I think David, you imagining, until all the time, you, you just have to think that, oh, back onto words for it even PhET right.I think That’s going to be a big, big change, even though a lot of that will happen under the hood. And I say advertisers for the back majority of advertisers, going to do, they’re receiving a Okta. Uh post-bacc but I think that’s going to be a big deal, but, I think those are the big changes, the custom product pages and the post-bac to advertisers the tree and the intent of the future.In many ways, I do think it’s going to be back to 2013 or 2014. I think I had talked about how. A number of installs and to be held that certain percentages, knew that each of them would convert to Jacob: 00:40:59Okay Shamanth: 00:41:00have a digital subscription. So they the cloud, but think it’s going to be a very similar world. We are going to be, you’re going to have to be more comfortable making decisions based off of incomplete data.But I do see that thing. David: 00:41:15One of the things I’ve been hearing a lot about since, since apple announced. The last year is incrementality testing. So systematically on and off, you know, so if you’re advertising, I mean, obviously this would be a tool for, for larger apps, but if you’re advertising across Facebook, Google snap, TOK, and you know, other mobile DSP.You know, systematically moving spend around and then measuring the difference or even turning spend off in certain channels and increasing spend in other channels. you seen that work? and are you, excited about the potential, of having tools in this space? do you think incrementality testing is a bit over-hyped.Shamanth: 00:42:02Any recommendation like incrementality? I think one caveat that a lot of people miss. That it’s useful. What a very, very tiny fraction of advertisers, David, like you said, if. Like all the society building networks, multiple DSPs, ad networks, instrumentalists TV. Yes, absolutely. You know, you should use incrementality because there’s just no way you’re going to find out if this is going to work incrementality and, media mix modeling.You want to use both of them had an ad to make that work. But I would say the kinds of advertisers who need like this are a very tiny fraction. So the vast majority of advertisers, even the advertisers who are on four to five channels, even advertisers who spend those six tickets in a monthly spend, I don’t think testing is going to be, Betty has just because Todd, you know, it’s, it just becomes imprecise.Volumes of data. You need a critical mass of data for to be useful. right. I think it’s a very similar thing that began X models, right? You need anomalous, anomalous budgets to dose to be useful and helpful. So I do take, these are great. I think the fact that they’re not an antidote to all of the havoc that has, about the applicable to our tiny Sheila David: 00:43:39That makes sense. And then if, if you’re only advertising on Google or only advertising and Facebook are only advertising on the two of them, they’re, they’re essentially doing some level of incrementality testing for you right there. Measuring the performance of this campaign against that campaign.And they’re up depending on the results that they seem to be seeing. So there’s some of that’s kind of already covered if you’re using those platforms, as your primary sources, Another thing I wanted to get your thoughts on was experimentation with other forms of advertising. I you’re, you’re very focused, currently on, on, you know, paid user acquisition and I don’t think that’s going away.And I think for, you know, for a lot of apps that is going to be the, the, the best, most reliable way to continue scaling even without accurate measurement. But have you seen any other. pushes with any of your customers, to work on, on, on different styles of advertising, different, approaches to marketing that are being successful.And do you see their kind of more incentive to try more things these days?Shamanth: 00:44:50No, I spoke about web, and I think there’s definitely much, much stronger interest in that campaign than even six months ago. Larger budgets, definitely stronger interest. I would, again, like with the extra mentality, I would say shut on smaller budgets, I do not recommend experimenting.I do not recommend diversifying, but certainly have larger budgets. I would also say that are worth spending in the tens of millions, budgets like that have the, even like millions a month. Uh there’s some, these other larger studios. They have already been on influencers that wasn’t even advertised on TV, none of this would be new to them.Yeah, so I, I don’t, I bet anything radically new that.David: 00:45:42Yeah. And then that kind of gets back to the old tried and true. You just got to build a good product and work on your monetization, and kind of get back to the basics of, of product as well. Jacob: 00:45:54I think sometimes these, these overly complex, overly targeted systems, especially for people who make software contend to be busy boxes, right. They can tend to be, can tend to be things that. Can attract our attention and, and ‘cause, they, they seem very like, you know, oh, we can get it right.And really make it scale. And then some people have right. It’s possible. But 80/20, I think for a lot of people out there, like just, just, just focus on the fundamentals and you can go pretty far. And then as time comes, you can layer in the more, you know,Shamanth: 00:46:27Yeah.Yeah, yeah, yeah, and like I said, at a certain level of care, influencers, all of this becomes much, much more meaningful. and like I said, that’s certainly more meaningful already. Yeah. You don’t need too much. David: 00:46:42Well, I think that’s a great place to wrap up. it was great chatting with you and yeah. lot of insight there on, on what’s working and what, how to think about things in this, this new world of mobile marketing. you know, as we wrap up, is there any last thoughts to include links to, where people can find you on, on, on the web and to RocketShip HQ and whatnot.Anything else you want to add?Shamanth: 00:47:09No. Though, like I said, guess this not bad as it reported to be. They’re raised to mitigate the worse-case scenarios, that helped me out, been able to share. so, hopefully they’ll come out on the other side of all of this without too much craziness.Jacob: 00:47:35I think people are going to keep using apps. That’s my, that’s my prediction.David: 00:47:40And I think people are going to keep advertising apps. Shamanth: 00:47:43Yeah, yeah, It’s the, how that’s going to have to change and it has to change dramatically and there’s no getting around that.David: 00:47:51Well, it was great chatting with you and, we’ll talk again soon. Shamanth: 00:47:55Absolutely.Jacob: 00:47:57Thank you.David: 00:47:58Good bye.

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